Bank of Scotland plc · DRN-6318749

The complaint Miss M complained that Bank of Scotland plc trading as Halifax unfairly blocked her account after it had concerns about a payment she wanted to make. She was unhappy with the service she received and felt that she’d been subjected to excessive and intrusive questioning. She believed this, as well as the unnecessary involvement of the police when Banking Protocol* was invoked, amounted to discriminatory and humiliating treatment. * a UK-wide scheme that allows bank staff to alert police when they are worried a customer is at risk of being scammed What happened Halifax flagged a four-figure payment Miss M wanted to make as potentially high risk because it was a first-time payment from her Current Account to a new recipient. Halifax carried out fraud prevention checks, including phone calls and an in-branch review. Although the account restrictions were subsequently removed, they were immediately re-applied when Miss M attempted to move the funds instead to her savings account - from where she’d sent money to the same payee on previous occasions. Halifax’s fraud team remained unwilling to process the payment or lift account restrictions unless and until Banking Protocol was completed. When Miss M complained, Halifax explained that its fraud systems were designed to safeguard customers and their money. It said the account had been blocked to protect her. But Halifax accepted that aspects of its communication and service had fallen below the expected standard. It apologised, confirmed the block had been lifted and paid Miss M £290 in compensation (£280 for distress and inconvenience and £10 for travel costs incurred in visiting the branch). Our investigator didn’t consider that Halifax had acted unfairly or unreasonably overall and felt the compensation awarded fairly reflected the poor service aspects. Miss M disagreed with the investigator and asked for an ombudsman review, so her complaint came to me to decide and I issued a provisional decision. Here’s what I said: ‘I’ve listened to call recordings of Miss M’s conversations with Halifax and my provisional decision is that Halifax should pay Miss M more compensation. I’ll explain my reasons. Halifax’s fraud process and safeguarding actions It’s understandable that Miss M found it difficult to understand why Halifax was preventing her from being able to send a payment to someone she’d sent money to previously – especially as the payment involved returning funds she had received from the payee. Our service is unable to make findings on whether or not something constitutes discrimination under the Equality Act 2010 as this is a matter only a court can decide. I have however taken into account the relevant law, including the Equality Act 2010, as well as

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regulatory requirements and best industry practice when deciding whether or not Halifax has acted fairly and reasonably. Halifax must comply with legal and regulatory obligations which include protecting customers from financial harm and preventing fraud. Its systems identified the proposed payment as potentially high risk, which led it to stop the transaction and restrict account access. In this situation, Halifax wasn’t able to simply rely on Miss M’s personal assurances regarding the transaction. But she was entitled to expect that Halifax would treat her fairly and reasonably throughout the process. Despite Miss M’s concerns, I do not consider it unfair or unreasonable for Halifax to invoke Banking Protocol. Halifax’s overriding concern was to protect Miss M after its systems had identified potential risk. So I am satisfied that it acted appropriately in taking this step. Halifax also reassured Miss M that, although her online banking access was restricted, any pre-authorised payments on the account, such as direct debits, would not be affected – which had been a concern for her. I appreciate that the restrictions were disruptive and inconvenient, but I consider Halifax reasonably balanced minimising the impact on Miss M while fulfilling its safeguarding responsibilities at the initial stage. The relevant account terms and conditions permitted Halifax to refuse the payment and restrict account access while conducting security checks. Although Miss M found the questioning intrusive, I do not consider the questions asked by the fraud team to have been unreasonable, particularly given the amount involved wasn’t a trivial sum and Halifax was aware of scams involving this type of situation. When Miss M was reluctant to answer certain questions, I can also understand why Halifax asked her to attend a branch with additional verification. Ultimately, Halifax’s terms and conditions allow the bank to refuse to make a payment in certain circumstances. I am satisfied that the approach taken would have been similar for any customer in comparable circumstances. I’m very sorry for how what happened made Miss M feel. But for these reasons, I don’t find that Halifax acted unfairly or unreasonably when it initially restricted the account and required further checks. But Halifax has acknowledged there were shortcomings in the service provided – and I agree. The service provided by Halifax and Miss M’s customer experience Miss M mentioned being concerned about the way Halifax handled her complaint. The industry regulator, the Financial Conduct Authority (FCA), says our service can only look into complaints about regulated activities – and complaint handling isn’t a regulated activity. We can however consider the overall customer service Miss M received when thinking about what Halifax needs to do to fairly compensate Miss M. Halifax accepted that it failed to sufficiently explain matters when asking security questions and that its communication caused Miss M distress. I agree Halifax should have communicated more clearly and provided better explanations when restrictions were applied, removed and then immediately re-applied. Had Halifax done so, I consider it likely Miss M would’ve felt more comfortable engaging with the process. This may have enabled the restrictions to be lifted sooner and Halifax’s

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concerns to be resolved more efficiently, particularly given the outcome was ultimately that the account was derestricted. Miss M had explained the purpose of the payment, stating it was for an overseas family celebration, and that she planned to move funds - originally received from the payee into her current account - to an account at another bank, to benefit from a better exchange rate. She was a long-standing customer known to branch staff and the branch was aware she’d previously made payments to the same payee from her Halifax savings account. Miss M attended the branch and provided all the evidence Halifax requested, including documents supporting the purpose of the transaction. She spent around four hours with branch staff addressing their concerns, including watching videos Halifax wanted to show her about ways customers can be defrauded. She had to return to the branch the next day. Despite these steps, after the account restrictions were removed, they were re-applied without a clear explanation and later removed again without further clarification. In these circumstances, I consider the onus was on Halifax to clearly explain why restrictions were re-applied after Miss M had cooperated fully with its requests. I cannot see that this happened, and I’m satisfied this significantly contributed to the stress and upset she experienced. While I cannot comment on Halifax’s internal fraud processes or tell it how to manage fraud risks, I do find that the communication failures in this case meant Miss M was not treated in a fair and reasonable way. Fair compensation Fair compensation should properly reflect the impact on Miss M of Halifax’s service failings so I consider Halifax should pay Miss M additional compensation. I am satisfied that total compensation of £450 is fair and reasonable in these particular circumstances. It’s comparable to the amount we’d pay in similar circumstances and fair compensation for Miss M in her particular circumstances.’ What the parties said in response to my provisional decision Miss M sent me detailed representations explaining why she felt the compensation amount didn’t reflect the seriousness of what happened. She also said that she felt a key aspect of her complaint hadn’t been fully considered, ‘...namely, the involvement of the police and the inaccurate information provided to them by Halifax.’ Halifax confirmed that it accepted my provisional decision.

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What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. In response to my provisional decision, Miss M wanted me to fully consider how the police came to be involved in the situation and the accuracy of the information that was provided. She said the bank had made incorrect assumptions which had resulted in an inappropriate escalation to the police, causing significant distress, reputational harm, and unnecessary embarrassment. She asked for more time to provide further supporting evidence and wanted to obtain a Subject Access Request from the police to confirm the information that was communicated by Halifax. I’ve thought carefully about what’s she’s said, but I am satisfied that the information that’s already been provided allows me to reach a fair outcome. I recognise that Miss M feels strongly about what happened. I don’t doubt that this was a stressful experience for her and her partner. But Halifax has important obligations. One of its responsibilities is to, where possible, protect its customers from falling victim to financial harm. Halifax needs to proactively monitor its customer’s accounts and review proposed transactions. To do so, Halifax may need to ask questions about the purpose of an intended payment, and it can refuse to make payments altogether. As I explained in my provisional decision, despite Miss M’s concerns, I do not consider it unfair or unreasonable for Halifax to have invoked the Banking Protocol. Halifax’s overriding concern was to protect Miss M after its systems had identified potential risk. In my provisional decision, I explained that I cannot comment on Halifax’s internal fraud processes or tell it how to manage fraud risks, so I am unable to say whether Halifax’s decision to escalate to the police was inappropriate or not. This means the information that Halifax provided to the police isn’t going to materially affect my findings. In reaching this conclusion, I’m also mindful that the Banking Protocol sets out that bank staff are encouraged to contact the police if they aren’t sure about the situation its customer might be in. For these reasons, and for those set out more fully in my provisional decision, I remain satisfied that the conclusions I reached - including the level of compensation awarded - are fair and reasonable in the particular circumstances of Miss M’s complaint.

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Putting things right Halifax should pay Miss M £450 compensation in total. Halifax may deduct the £290 (and any other amounts paid already) from this total. My final decision My final decision is that I uphold this complaint in part and Bank of Scotland plc trading as Halifax should take the steps set out above to put things right. Under the rules of the Financial Ombudsman Service, I’m required to ask Miss M to accept or reject my decision before 25 May 2026. Susan Webb Ombudsman

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