E-banks told to carry the can for online fraud

Internet banks must take responsibility for fraud and draw up clear policies outlining their procedures in the event of a security breach - or risk losing customers.

That warning was made by the National Association of Bank Customers (NABC) and the Consumers' Association late last week in the wake of the recent high-profile security blunders involving companies like Barclays and Powergen.

British banks have a variety of policies in place outlining their policies if a breach occurs - but the fact that there are no standard guidelines in place is leaving customers confused.

In some cases, customers themselves are liable for any losses incurred.

Stuart Cliffe, director of NABC, said: "Online banks should make a definite guarantee to their customers that if anything goes wrong, the money will be refunded immediately to their account. Banks can easily stand the loss of a few hundred or thousand pounds but it would be difficult for the customer."

Paul Kitchen, editor of Which? Online, called for a clarification of banking regulations: "It is for the customer's benefit that the banks extend their code of practice into virtual banking. Banks are competing in a very small space and they are struggling to come to terms with the technology itself."

Anthony Riem, a partner at data protection specialist law firm Philippsohn Crawfords Berwald, said: "The current terms and conditions of online banks are blurred when it comes to fraud issues. Banks are rushing to get to the internet too fast without first convincing people they will look after customers' money and reassure them about who is responsible. Technical testing is often ignored too which can cause severe damage."

Most online banks operate a policy whereby each fraud case is treated on an individual basis. A spokeswoman for Barclays told silicon.com that "every case is different" - which means the customer may bear the cost if they have behaved negligently.

But few banks were willing to define what negligent behaviour is. "We are not in a position to comment on imaginary scenarios," she added.

However, the Halifax, which is due to launch its delayed internet banking venture, Intelligent Finance, next month, has publicly announced it will refund any losses which are caused by internet fraud.

A spokesman for the Halifax said: "If the customer in question has not acted with criminal gain in mind, we guarantee any losses incurred to the customer."