By 
Most financial scams are discovered days or even weeks after the event. By the time victims raise the alarm, fraudsters have drained their bank accounts and vanished with the cash.
Ruth Pondugula’s case is different. She alerted Barclays on the same day she paid £35,500 over 11 separate transactions to 23traders.com, a “binary options” financial trading website that has since been liquidated.
Yet even though the bulk of the money had not left her account – and was labelled as “pending” when Miss Pondugula alerted Barclays – the bank released the funds to the website more than three months later.
Ms Pondugula, a 41-year-old IT systems analyst from London, said she clicked on an online pop-up advert for 23traders’ services in April last year. She submitted her contact details to find out more information.
Binary options are high-risk trades that allow customers to bet on the movement of an individual stock, index or currency over very short time frames. The nature of trades can cause “addictive behaviour typically associated with gambling”, according to the City watchdog, which began to regulate the area only this year. EU regulators plan to ban binary options entirely.
Several days later Ms Pondugula was telephoned by 23traders and given what she believed to be a demo. The firm promised to turn a £300 “trial investment” into £1,000 and talked her through how to enter her debit card details to make a payment. Over the course of three hours she was pressured into investing greater sums by call handlers who Ms Pondugula said used “psychological tactics”.
She signed on-screen what she thought was a declaration that she understood it to be a demonstration but appears in fact to have been authorisation for the payments. “They were threatening and bullying me to act quickly,” she said. “I was totally out of my mind and shaking – I just wanted to get off the call.”
She called her bank and Action Fraud, the national fraud and cybercrime reporting agency. Barclays opened an investigation and initiated the “chargeback” procedure operated by Visa, Mastercard and American Express for disputed payments.
Unlike “Section 75” protections on credit cards, chargeback is not a legal requirement. In general, consumers have 120 days to file a complaint and firms have to respond within 45 days.
With the transactions still pending, Ms Pondugula thought she had acted quickly enough. So she was shocked when in early August, three months after alerting Barclays to the payments, £35,500 left her account.
A Barclays spokesman said: “The merchant was able to provide evidence that Ms Pondugula had entered into a genuine contract with the company, signing an agreement to their terms and conditions and authorising the withdrawn amounts. This evidence meant that we could not stop or recall the full amount from the merchant.”
Barclays refused to refund the money, apart from £1,500 it had already returned by the time it began its investigation. It said this was a “goodwill gesture”.
The case was taken to the Financial Ombudsman Service, which rules on disputes between firms and their customers. While the ombudsman agreed Barclays’ customer service had been “poor in some areas” and that it had given “misleading information”, it ruled in the bank’s favour. Miss Pondugula is appealing.
Andrew Goodwill of the Goodwill Group, a firm that helps businesses combat card fraud, said the case showed why he advises people never to use a debit card when buying online.
He said: “Do not buy anything on the internet using a debit card, because that is your own money. The bank will try much harder to get money back when it is their own.”
Mr Goodwill said online shoppers should always use a credit card. Credit card payments of £100 or more are covered by Section 75 of the Consumer Credit Act. This ensures that consumers are not liable for paying for goods or services they never received or that were not as advertised.
Section 75 is a powerful protection. Simply paying a deposit by credit card can give you protection for the full amount if something goes wrong. However, when retailers use third-party providers to process payments you may not be covered. Disputes should be taken to the ombudsman if they cannot be resolved with the card provider.
23traders and its parent company, Bulgaria-based Hermes Ventures, could not be reached for comment.
sam.brodbeck@Finance.co.uk
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