Online banks failing customers

Online banks are failing to protect consumers concludes a report published by British research institute the Foundation for Information Policy Research Wednesday.

The report -- Electronic Commerce: Who Carries the Risk of Fraud? -- claims the small print on online banking contracts shifts the burden of proof of fraud onto consumers. This is the opposite of bricks and mortar banking contracts.

Report author Brian Gladman explains. "If someone else steals your security details and you realise when you get your statement and complain to your online bank, the balance is shifted to you to prove you did not make the transaction," he says. "Banks are traditionally paid to take risk but now the risk has shifted to the consumer."

Gladman points to Egg, Smile the Royal Bank of Scotland and Halifax as the worst offending banks.

A spokeswoman for Egg -- the online bank set up by Prudential -- hits back, describing the report as "misleading". "The report has only taken a part of the terms and conditions. Unless the customer is proved to have acted fraudulently they will get their money refunded," she says.

Gladman is sticking to his guns though. "The Egg terms and conditions read as follows: 'Until you tell us you will be responsible for any action even if it was not given by you.' It's there in black and white. It is the bank versus the single consumer. It is obvious who will win."

Barclays -- which now has online service -- refused to pass on to Gladman the details of its terms and conditions but claims they are the same as those that govern current accounts. "If we find the customer has not been negligent and if the fraud is not the customer's fault they have no cause to worry. They will get money refunded," says a Barclays spokeswoman.

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