A DATA security flaw in the Bank of Scotland online banking system could have left thousands of users vulnerable to fraud, it has been revealed.
The bank's previous online application process meant a customer's bank, savings, credit card or loan details online could be made available to anyone exploiting the loophole.
Personal finance site MoneySavingExpert.com uncovered the flaw last week and alerted Halifax and Bank of Scotland (HBOS), part of Lloyds Banking Group, and gave the banks time to fix it before revealing it publicly.
The banking group has since reported the breach to the relevant authorities and said it is "confident" no customers were defrauded as a result.
The flaw in the banks' online application process meant that anyone with access to three pieces of somebody's personal information -- a correct name, date of birth and postal address -- could set up an account in that person's name. A correct email address was not required.
MoneySavingExpert said this kind of information is potentially accessible via "social media, online tools, rifling through bins and much more."
"The banks ask more questions but answers to them don't have to be given accurately to set up an account."
Once the account was set up and viewable online, Halifax/Bank of Scotland automatically links all products customers have with either bank.
Therefore, they can see info on those accounts including account numbers, sort codes, balances, overdraft limits, direct debits and standing orders.
However, as linked accounts are 'view-only', no changes or actions could be taken, such as moving money or setting up standing orders.
Since alerting the banks to this flaw, HBOS have overhauled their how new customers apply online, implementing a postal activation code.
A Lloyds Banking Group spokesman also gave assurances that other subsidiaries of the Lloyds group, including Lloyds Bank and Scottish Widows, were unaffected.
A spokesman said: "We take the financial security of our customers extremely seriously and have advanced safeguards in place across our IT systems.
"All applications are scrutinised for anything suspicious and this triggers further action immediately.
"We recognise that allowing customers to view linked accounts immediately following an online application could have been used inappropriately in certain, limited circumstances and this will no longer happen."
The bank said some 23,000 accounts have been opened fulfilling the criteria above. However it says it has undertaken a review of these accounts over the past few days and insists there "have been no instances of fraud or customer complaints".
Martin Lewis, founder of MoneySavingExpert.com, said: "In a world where scammers and hackers are getting ever more powerful we need our banks to step up their action, this isn't good enough.
"The ability to easily view all of someone's banking details is a criminal's Christmas, never mind the potential privacy breach.
"We are often told to protect ourselves but they need to act in a way that protects us too. This wasn’t some clever hacker finding a breach, it was simply a design flaw. If they're not much more professional than phishing websites, how are we to judge who's real and who's a fraud?"
The Information Commissioner’s Office (ICO), responsible for upholding data privacy laws, and City regulator the Financial Conduct Authority (FCA) have both been made aware of the matter.
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