Customers kept in the dark as banks are reluctant to be upfront about alternative to chip-and-PIN cards
Thousands of elderly people are being left vulnerable to fraud because of the banking industry’s failure to explain to customers that there is an alternative to chip-and-PIN technology.
Under the Banking Code, all banks must offer a “chip-and-signature” account for those who may find it difficult to remember their PIN, or cannot use a chip-and-PIN terminal. However, Times Money has discovered that some banks are reluctant to tell customers of this alternative method.
Vulnerable people who are forced to use chip-and-PIN are likely to write down the number or tell it to someone else, which means that it is highly unlikely that they will be reimbursed if they become a victim of fraud. Jane Vass, of Age Concern and Help the Aged, says: “Many older people are driven towards payment methods that they are not comfortable with, putting their financial security at risk.”
John Walter, a pensioner from Devizes, Wiltshire, was recently sold a fee-based NatWest current account that came with a chip-and-PIN card. The card was stolen and thieves drained his account of £7,000 by withdrawing money at cash machines over 14 days. Mr Walter, who is 73 and described by friends as vulnerable and forgetful, admitted to NatWest that he had written his PIN in his diary. Although the diary was not stolen, NatWest still refused to reimburse his losses.
Elizabeth Merritt is a friend of Mr Walter and has taken up his case with NatWest. She says: “John has been with NatWest for 50 years and trusted the bank implicitly. He does all transactions inside his branch and had never even used his card. Despite this, NatWest still persuaded him to pay £13 a month for a chip-and-PIN account with features that he would never need. He was never told about chip-and-signature.”
NatWest told Mr Walter that somebody with access to his home must have seen the PIN and stolen his card, and that this constituted a breach of his terms and conditions. He was also told by NatWest that none of the cash machines used in the fraudulent transactions had CCTV cameras, and “this may be something the fraudster had considered before using the card”.
When Times Money approached NatWest, the bank maintained that Mr Walter had been negligent. However, it agreed to refund the £7,000 as a gesture of goodwill. Mr Walter has now been given a basic bank account and will request chip-and-signature.
Another pensioner, Rosa Farrell, of Hereford, recently had £3,500 fraudulently withdrawn from her bank account by her eldest son, who had a gambling problem. Mrs Farrell, 65, wrote down the PIN and kept it well hidden in her house, away from her card, but on a visit her son managed to find the card and the number. He was convicted for the theft.
Mrs Farrell’s bank, The Co-operative Bank, said that because she had written down the number she had been negligent and would not be reimbursed. She had to take her case to the Financial Ombudsman before she recovered her money. “I don’t know why the bank did not stop the suspicious transactions, which were totally out of character,” she says. “In the end, the ombudsman ruled that I was entitled to believe that my bank details were safe in my own home.”
The Financial Ombudsman Service, which resolves disputes between consumers and banks, deals with about 150 complaints about chip-and-PIN fraud every month — usually when someone’s bank has refused to compensate them for losses.
Fewer than 500,000 people have a chip-and-signature account, according to the UK Payments Association, despite the banks agreeing to offer vulnerable people an alternative to chip-and-PIN when it was introduced in 2004. However, there are 700,000 people with dementia in the UK, according to the Alzheimer’s Society, while the Royal National Institute for the Blind says that 1.8 million people are blind or partially sighted. Many of these people should have chip-andsignature accounts.
Sandra Quinn, of the UK Payments Association, says: “It would be very disappointing if banks were not giving chip-and-signature to customers who need it. Some people may find in the future that chip-and-PIN is not suitable. They have every right to ask for an account with chip-and-signature.”
Pensioners are also encouraged to use chip-and-PIN to receive their state pension and other benefits via the Post Office card account, which was introduced in 2003 to replace pension books. Neil Duncan-Jordan, of the National Pensioners Convention, says: “Some pensioners still queue up to receive their pension holding a piece of paper with their PIN on it. Anyone who is uncomfortable with PINs can request to have benefits sent by cheque in the post.
“Chip-and-PIN is simply not suited to many elderly people, and banks and the Government should do more to promote alternatives.”
Ross Anderson, a security expert at the University of Cambridge, says that it is in banks’ interests to push chip-and-PIN. He says: “Quite simply, if you use a PIN, disputed transactions are your fault. However, a forged signature makes a transaction null and void, which means that the banks cannot hold customers liable. Banks are exploiting the old and vulnerable because they want to take away their consumer protection. It’s a disgrace.”
The Banking Code, to which all banks must adhere, states: “We will tell you about alternatives to chip-and-PIN, which are available if you are unable to use a PIN because of a disability or medical condition.”
Several high street banks confirmed to Times Money that they offered chip-and-signature, but emphasised that it was only for specific types of customer. A spokeswoman for Barclays says: “Chip-and-signature is for customers who have a disability that makes using a PIN difficult or imposs-ible, either because of dexterity problems, visual impairment or difficulty remembering the number. All other customers are issued with a PIN.”
A spokesman for Santander, which owns Abbey, Bradford & Bingley and Alliance & Leicester, adds: “Chip-and-PIN is an important tool in fighting card fraud, and PINs should not be divulged to other people or written down. Customers can change their PIN to a more memorable number.”
New rules relieve customers of burden of proof
The Banking Code will be abolished next month and replaced with a complex set of rules, the Payment Services Regulations (PSR).
Experts fear that consumers will no longer have a user-friendly set of guidelines that clearly explain banks’ responsibilities. Instead, they will have to wade through a 152-page document for details of their rights.
The Financial Services Authority, the City watchdog, will enforce the new regulations. It says that victims of fraud will actually have more protection, with the onus on the bank to act quickly to prove that a transaction was the customer’s. Unless the bank can show a good reason why it needs to investigate the claim, it will have to refund the amount immediately.
Page 38 of the PSR states that if a person notices a suspicious transaction on an account, it is for the bank to prove that the transaction was “authenticated, accurately recorded and not subject to technical breakdown or other problem”.
Currently the onus is on customers to prove that suspicious transactions were not their own. The Banking Code states: “We will need you to give us confirmation or evidence that you have not authorised a transaction.”
Source:- Times Online, UK ; By Lauren Thompson
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