How to beat identity fraud Card fraud

Banks have refused refunds for cash machine fraud using the correct Pin

If your card is stolen and money is taken fraudulently from your bank account or credit card using a cash machine and the correct Pin, you may have been 'shoulder surfed'. Under the banking rules your bank should refund your money as long as you have not acted fraudulently or negligently.

But there have been a number of recent cases where money was taken this way but the victim's card was not stolen. As a result, banks have refused to refund the money, saying that the victim must have let someone use their card and told them their Pin.

In April 2009, a county court decided in favour of Halifax in a case like this. The alleged victim Alain Job said he had not authorised the withdrawals.

Before going to court, he had already complained to the Financial Ombudsman Service (FOS) after Halifax turned his original request for a refund down but the FOS did not uphold his complaint.

New rules offer hope  

Card fraud victims may now get more protection if money is taken from their account using a cash machine and the correct Pin but their card was not stolen.

New European laws, which came into force on 1 November 2009 on the same day the Financial Services Authority (FSA) started to regulate banking, will make it harder for banks to refuse refunds in these situations. They say that banks must immediately refund any money a customer claims was taken fraudulently unless the bank can give a good reason why it needs to investigate further.

There are also clearer rules about what evidence a bank must provide to show that it is not liable for the fraud. It must show that the transaction involved the customer’s actual card as well as the Pin and was accurately recorded by the cash machine, entered in the bank’s accounts and not affected by any technical problems with the cash machine.

The barrister acting for Alain Job in the Job v Halifax case, Stephen Mason, said: ‘It’s in banks’ interests to make sure they can do this effectively. That would be my advice if I was asked to advise them. However, if they do as little as possible, the FSA might decide to take action.’

Evidence destroyed

In the Job v Halifax case, essential proof was destroyed by the bank but Stephen Mason says the bank would have to provide more evidence to prove its case if it came to court now.

If you have a dispute with your bank over an unauthorised cash machine transaction, use the template letter below to write to your bank telling it what evidence you might rely on to prove whether your card was used or not to discourage the bank from destroying it. 

You should send this after your bank has refused to refund the money but before you complain to the Financial Ombudsman Service or go to court.

Visit Stephen Mason's website for more information on what to do if your bank refuses to refund money that was fraudulently taken from your account using a cash machine.

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