The IVA News team saw this article in the FT, published 5 Jan, and thought it an interesting example of how consumers are sometimes poorly treated by banks and banking regulations:
Customers are guilty until proven innocent
Official figures may show that card fraud is falling as chip and pin has made life more tricky for fraudsters. But the flipside may be that cardholders who have fallen victim to fraud could find it more difficult to reclaim their losses from their provider.
A number of debit and credit card users have contacted the FT after they have suffered card fraud and struggled to gain compensation from their bank or building society. These people may have had their cards cloned, intercepted or their pins witnessed by a fraudster. The concern is that some banks may be less willing to accept that fraud has occurred now that debit and credit cards are pin-encrypted.
Some banks have asked their customers to prove that they have not received cards nor been negligent with their pins. Other customers say they have been treated as if they were themselves involved in the fraud.
The banking code has a very clear stance regarding card fraud. It says that the onus is on card providers to prove that the customer has acted negligently rather than the other way around.
“As long as the customer has not acted negligently or fraudulently, then they are entitled to a full refund,” says Apacs, the UK payments association.
According to Apacs, total card fraud fell 5 per cent in the first six months of last year, from £219.5m to £209.3m. The main reason for this was the introduction of chip and pin, which has made it more difficult for criminals to make purchases with stolen cards.
The biggest threat to consumers now is card-not-present fraud – where stolen card details are used to purchase goods or services over the internet or telephone. According to Apacs, this accounted for just under half of all card fraud in the six months to June 30. There has also been substantial growth in fraudsters copying magnetic strip details and using hidden miniature cameras to capture pins at cash machines.
Meanwhile, instances of fraud dubbed “mail non-receipt” – where cards and pins are intercepted and used fraudulently – fell by more than half in the first six months of last year. Lost and stolen card fraud and identification theft also fell.
Apacs says mail non-receipt fraud has become more difficult since chip and pin was introduced last February as fraudsters have to intercept both the card and the pin, which are usually sent at different times from different locations.
Also, there was a sharp increase of this type of fraud when chip and pin cards were sent out during 2004 and 2005, so last year’s figures look better comparatively. Even so, criminals still racked up £9.8m worth of this type of fraud in the first half of last year.
Apacs says it is working with the Post Office and courier services to crack down on the interception of cards and pins. It is trying to identify weak spots, such as blocks of flats and shared houses, where a number of people could have access to the mail. Apacs says banks are increasingly sending unactivated cards to these locations, which can only be activated when security questions are answered, or asking customers to collect their cards from a local branch.
If you do suffer this type of fraud then, according to the banking code, you should not be liable for any losses. The code stipulates that if you have not received your card and fraud is committed on it then you do not have to pay anything.
However, in some cases it seems the banks’ view may not be so black and white. If the bank has reason to believe that the fraud has been committed by someone you live with, for example, it may insist that you take the matter up with the police. The bank may want to see that you are willing to involve the police before they refund your losses.
The banking code says that unless there is clear reason to suspect that the cardholder has colluded in the fraud, then they should not be liable for any losses.
If you have fallen victim to fraud and are struggling to get the money back or feel you have been treated unfairly or unsympathetically by your card provider, then Apacs says the first step is to follow your provider’s official complaints procedure.
If this does not prove satisfactory, you can take your case to the Financial Ombudsman.
Apacs says that every reported case of fraud will be treated individually. There are no set timelines as to how long a card issuer can take before making a decision on your case.
There are also no specific guidelines as to whether your provider has to make up for lost interest or any charges on the account as a result of the fraud – such as overdraft or late payment fees. Neither are there rules governing how much compensation should be paid for any inconvenience endured by the customer.
If the ombudsman calls for compensation to be paid for the customer’s time spent chasing the claim, it is paid at a rate of £10 per hour.
Apacs also advises people to be vigilant about their pin. It says 25 per cent of Britons have disclosed their pin to someone else, which can make them liable for any card fraud losses. It also advises against using the same pin for all your cards and letting your cards out of your sight – such as starting up tabs in restaurants and bars, for example.
To view the Banking Code online, go to www.bankingcode.org.uk and click on “Library”.
Source: Sharlene Goff, FT.com
