Banks should accept liability, says House of Lords

Rob Stringer

The House of Lords have called for banks to be held responsible for cases of e-fraud perpetrated against their customers.

The proposition comes as a result of a report published by the House of Lords Science and Technology department, who have called on the government to offer the public better protection from online crime.

Currently, the committee maintains that banks will often refuse to compensate customers after fraud, arguing negligence or complicity on behalf of the victim. It’s argued that by being forced to bear responsibility, banks will be compelled to evaluate and improve the security measures that they implement.

The report also calls for procedures to be implemented whereby victims of fraud will be able to report suspected criminal activity directly to the police rather than to their banks, which at the moment may not have the commercial incentive to pass on such reports to the police. The committee has also called for a data breach law to be established.

“Our chances are better than they were last year,” says Lord Broers, former chairman of the Science and Technology Committee and chairman of the original inquiry into Personal Internet Security. “The government has expressed more of an interest. There’s been no action yet, but they will report back to us every two months.”

Broers admits that the reaction from banks will ‘not be terribly positive’ but states that when banks assume liability now, it is only voluntary.

“It’s worth reading the banking code sometime,” suggests Lord Broer, who feels that consumers do not currently have enough rights. “If you have your wallet pinched in the street, you’d go to the police. If you lose ten times that online, you’re likely to lick your wounds and think that nobody can help. That should be corrected.”

Broers also admits that it would mean more work for the police.

"We are pleased that the government has taken on board more of the recommendations in our report than they did in their initial response,” notes Lord Sutherland of Houndwood, chairman of the Lords Science and Technology Committee. “The catastrophic loss of data by HMRC in November 2007 seems to have concentrated minds on the importance of data protection both by Government and the private sector.”

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