Only ONE PIN? It’s YOUR Fault If Your Cash Is Stolen!

5th December 2012  

Signature-authorised card purchases were phased out in 2006 in favour of ‘chip and PIN’ technology. Chip and PIN was brought in to deter criminals from gaining access to consumers’ cash and making unauthorised purchases. However, this system is far from foolproof, and with an 11% rise in ‘chip and PIN’ fraud seen in 2011, some banks have started to introduce stringent measures to protect their customers, or is it to protect themselves? Recent moves clearly indicate that banks are trying to get consumers to bear the brunt of ‘chip and PIN’ criminal activity.

How Does Chip and PIN Fraud Work?

The UK Card Association has revealed that the technology used in modern cards is flawed and can be hacked, explaining the recent rise in ‘card cloning.’ There are an estimated 1,000,000 card readers in the UK today, processing around 800,000,000 transactions every month. Researchers from the Card Association discovered that criminals are able to purchase second-hand devices from online auction sites that will load fake cards with malicious software.

These cards are then put into cash dispensers and card readers, which become infected with a program that causes them to store details of all subsequent transactions. The fraudster returns later with a second card that downloads all the available magnetic strip data, including card details and PIN numbers.

How The Banks Want You To Behave

In a bid to encourage consumers to be more vigilant about protecting their card details a number of High Street banks, including Lloyds TSB and HSBC are requesting that their customers follow complex rules, designed to protect data. If, however, these rules are not followed and a customer’s card is cloned, they are also implementing caveats that will mean that they are not liable to pay for what their customer has lost, and the victim of the theft is effectively left out of pocket.

However, what is causing a furore between the banks and consumer rights bodies is that these rules are being added to the ‘small print,’ rather than being declared openly. Industry experts claim that the guidelines are virtually impossible to follow and are being seen as an escape route through which banks can avoid paying out to victims of identity theft. Banks currently pay an estimated £341,000,000 to victims each year.

Is It Fair?

The guidelines themselves include the suggestions that consumers must have different PIN numbers for each of their cards. Richard Emery, of card security firm, 4Keys International, says

“I am really worried because these changes are potentially dangerous. For example, if you are forcing people not to use the same PIN, you are increasing the risk of them writing it down, making it even easier for them to be defrauded.”

However, the Spanish bank, Santander, which is leading the implementation of these rules, is suggesting that customers may still be entitled to a payout if they can prove that they only failed to observe at least one of the new rules, but took care to stick to all the others.

The Financial Ombudsman’s Service has taken the stance that the banks are not exempt from blame. As the people who hold consumers’ money, it is up to them to provide sufficient security measures: “These banks may introduce new rules, but that does not shift their responsibility to properly investigate. If they think you have been negligent, it is down to them to prove it.”

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