Victims of fraud not liable for thief's charges -- usually
By Benjamin Salisbury
Becoming a victim of credit card fraud is inconvenient and frustrating but at least you're not liable for any fraudulent charges -- right? Right, in most cases. But there are situations in which your bank could deem you responsible, instead.
"The position of the banks is clear -- those customers who are victims of fraud will be refunded and will suffer no loss," said Giles Mason, senior press officer for Financial Fraud Action UK. "The only exception is where cardholders have been reckless or have acted in gross negligence -- which is a high threshold that needs to be overcome by the bank. It is not for cardholders to prove their innocence."
are you on the hook?
The bank or card issuer may declare reckless or negligent behaviour (and therefore refuse a reimbursement) if:
- The company can prove that you authorised the transaction. However, there must be physical proof of this. The card company cannot simply say that use of your password, PIN or card conclusively proves you authorised a payment.
- It can prove that you acted fraudulently or that you deliberately, with "gross negligence", failed to protect your card details, PIN or password in a way that allowed the transaction to occur. A couple of examples: you wrote your PIN on the card or in your wallet, or told someone your PIN, which they subsequently used for a fraudulent transaction.
- Thirteen months or more pass between the time the fraudulent transaction leaves your account (when it's paid for, not the date it first appeared) and the time you report it.
- You fail to inform the bank that your credit card is lost or stolen or that your PIN is compromised. However, you are only liable to pay up to £50 and banks and credit card companies often waive this amount.
- You shopped online and failed to use the card provider's 3D Secure system (e.g., Verified by Visa or MasterCard SecureCode), a requirement that is found in the small print of many credit card agreements. Failing to use this security makes you liable for showing a "lack of reasonable care".
Diana Yeboah, press officer at the Strategy and Competition Division for the Financial Conduct Authority, explains the obligations a cardholder has for protecting their credit card against fraudulent use:
"When a consumer receives a credit card, they must keep their details secure," she says. "It is important that they protect their personal information on how to access their account, such as passwords or PINs." Additionally, she says, cardholders must notify issuers as soon as possible if they think their card is lost or stolen, or if they think their PIN or passwords have been compromised."
Other than that, the card company must issue you a refund, per the UK Lending Code. The company may question you and conduct a review, but it cannot delay the refund while waiting for information.
to do if you don't receive a refund
If your credit card company refuses to refund an unauthorised payment, it should explain why.
"The Financial Conduct Authority's extensive review of fraud refunds published this summer found that, if they suffer fraud, customers are being treated fairly by their card issuers," Mason said. "The FCA also identified that firms err on the side of customers when they are reviewing a claim. Refunding fraud claims is a highly regulated field, with an independent appeals process available to the small number of customers who have their fraud claim turned down."
However, according to consumer group Which?, the Financial Ombudsman Service (FOS) said that while it had seen improvements on how banks handle complains, in many cases, banks did not conduct a full investigation and made their decisions "on a hunch".
"Banks have a duty to resolve cases of fraud quickly and can only delay a refund if there is suspicion of wrongdoing," Which? executive director Richard Lloyd, said in a press release accompanying the research. "If you've been denied a refund by your bank you should escalate your case to the Financial Ombudsman Service." Which? found that a quarter of all cases referred to the FOS are upheld in the consumers' favour.See related: Catching and preventing familial fraud, 6 ways to reduce your risk of financial fraud
Published: 9 October 2015
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