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Tough luck for ripped-off investors - Banking Ombudsman

14 December 2016

The Banking Ombudsman has warned anyone hoping to be reimbursed for unsound investments not to expect their bank to pay out.

Nicola Sladden says the Banking Ombudsman Scheme has received several complaints from individuals seeking to recoup credit card payments made to binary options trading sites.  

She says binary options trading is high risk, so people need to take extra care before investing.

Binary options trading involves speculating on whether stocks or currencies will rise or fall. Online platforms may not be regulated, which means there is a higher risk the investment is a scam.      

“Bank customers complain to us that banks won’t arrange the return of the money.

But the fact is, banks can’t do that because the transactions were authorised by the individuals themselves,” Ms Sladden says.

“The payment process was perfectly correct. It was the investment that was unsound, and banks cannot be held to account for that. It’s a case of buyer beware.”

Ms Sladden says complainants argued that banks should charge back the transactions to the options trader’s bank, so that it could in turn debit the trader’s account.  

Chargeback arrangements, rights and timeframes are explained in the card company’s rules.  

“Cardholders can ask for a chargeback, but they have no automatic right to one. It is industry practice to charge back disputed transactions if there is a valid reason, but making a poor investment decision is not one of them. People need to think carefully before giving merchants their credit card details online – and hence permission to bill them,” she says.

Valid reasons for a chargeback include such things as an unauthorised transaction, a failure to receive the goods or service, defective or incorrectly described goods or services, and a duplicated or wrongly charged transaction.

The Financial Markets Authority describes binary options trading as “very high risk, even for experienced investors”, adding that “there’s a very high chance you’ll lose money”. The authority says slick, high-pressure marketing techniques make such trading look much easier and safer than it really is.  

Ms Sladden says some bank customers had authorised transactions totalling tens of thousands of dollars. They were often unaware they had committed to making a certain number of trades before they could withdraw their money.

“Most of these trading companies are overseas, and some individuals end up trading without understanding the risks involved.”    

See the scheme’s quick guide to credit and debit card transaction chargebacks for information on credit card payment complaints about online services such as betting and binary options trading.

Last updated on the 16th September 2019