ATM-related complaints constituted the bulk of complaints lodged with the office of the banking ombudsman last year.
The 2013 annual report of the Ombudsman for Banking Services, Clive Pillay, shows that ATM-related cases accounted for 23 percent of all complaints, and increased to more than 1 800 cases, from 1 100 in 2012.
Most ATM complaints related to cases of ATM fraud, and the ombudsman had to decide who was liable for the resulting loss.
Pillay says that, since every case has unique circumstances, it is impossible to give “blanket answers” in terms of liability. He says his role is to decide not just on maladministration on the part of a bank or negligence on the part of a consumer, but also contributory negligence, either on the part of a bank or a consumer.
“Our principle is that if a consumer has been negligent, then we would probably find against the consumer. But our approach, generally, is that if an ATM has been tampered with, we hold the banks liable, because they have undertaken in the Code of Banking Practice to provide safe and secure banking and payment systems,” Pillay says.
He says ATM fraud takes place when your card and/or PIN is stolen at an ATM. This can happen by way of:
* Shoulder-surfing. This is when a fraudster spies over your shoulder to get your PIN. Your PIN is only useful to the fraudster if he or she also has your card, so this constitutes a step in the process of a fraud.
* Keyboard/keypad overlay. Pillay says this “overlay is integrated with the ATM” and is used to record your PIN.
* Card swapping through “sleight of hand”. Pillay says the fraudster distracts you while you are using the ATM and swops your card with another.
* The Lebanese loop. This is when wire and an X-ray-quality plastic sleeve is inserted into the slot in an ATM. The wire hooks your card and the plastic prevents the machine from reading the information on the card’s magnetic strip. You punch in your PIN, but the machine cannot read – or return – your card. You leave the ATM thinking that it has “swallowed” your card. Meanwhile, your PIN has been recorded via a tiny infrared camera attached to the ATM to scan the keyboard. This scam enables the fraudsters to obtain both your card and your PIN. Pillay says fraudsters have also taken to defacing the fraud hotline numbers on ATMs to prevent you from reporting that the ATM has retained your card.
Pillay says he always finds in favour of consumers who fall victim to the Lebanese loop. “The consumer can’t be reasonably expected to notice that kind of sophisticated tampering with a machine. It would be unfair to expect the consumer to examine every ATM before use,” he says.
The ombudsman’s report also shows a dramatic 27-percent increase in the number of cellphone phishing cases. Pillay says this increase translates into 340 cases in 2013, and it is an area that has the potential to grow exponentially, because of the increased use of cellphone banking.
“Fundamentally, it’s one scam: you receive an SMS, apparently from your bank or the South African Revenue Service or a company, notifying you that you’ve won a competition. These text messages are designed to induce you to part with your banking details in order to claim a refund or reward.”
Last year was one of the busiest in the history of the ombudsman’s office, which handled a total of 4 950 cases, the report says. It takes the office 82 days, on average, to deal with a case. Most cases were concluded at assessment stage, without requiring further investigation and adjudication by the ombudsman.
In about 60 percent of cases, the finding went against the complainant. The report says the percentage of findings in favour of complainants dropped by two percent and that this is attributable, largely, to the fact that complainants were victims of fraud or they were debt-stressed.
“In these instances, there was no maladministration on the part of the bank and, therefore, findings could not be made in favour of the complainants,” Pillay says.
He says his office does not follow a rigid approach to complaint resolution. “Flexibility is key to reaching solutions that take into account the unique characteristics of each case. We cannot be bound by legal rights alone in a decision that, after all, may affect a person’s life irrevocably.”
Ombudsman handles each case on its merits
Case studies in the annual report of the Ombudsman for Banking Services, Clive Pillay, are useful indicators of how complaints are handled, and more or less what you can expect when reporting a matter to the ombudsman’s office.
*Reign in Spain
The following case, titled in the report “Reign in Spain sends money down the drain”, tells of a client who compromised himself in more ways than one.
During a visit to Spain, the complainant visited various nightspots. On one occasion, he asked two local women to direct him to the nearest ATM. They then went to an apartment. The next day he noticed suspicious SMSs from his bank for amounts totalling R240 000. Given that these transactions were not in line with his normal spending pattern, he believed the bank should have detected the fraud and stopped his cards.
The bank refuted this on the grounds that the complainant had compromised his cards and PINs and that each transaction was carried out using the correct PIN.
Although he denied compromising his cards, it was clear to the ombudsman that this had happened. The complainant had stopped the cards hours after the disputed transactions.
The ombudsman found that, as the customer had been using his cards regularly in Spain before the disputed transactions, the bank should not be held responsible for losses incurred through fraudulent activities not having been picked up timeously.
* No stop, no pay
The complainant received notifications of two withdrawals after his card got stuck in an ATM. While reporting the matter to the bank, a third withdrawal notice came through. He claimed a R5 000 refund, stating that his card had been cloned.
The bank found no evidence of cloning, as the withdrawals were made with the complainant’s card and PIN. The investigation by the ombudsman’s office supported this. It said the bank can be held liable only for transactions occurring after a card is stopped, and because the complainant’s disputed transactions happened before his card was stopped, the bank could not be expected to compensate for these.
However, the bank had not stopped the card immediately and the delay had allowed the third transaction to go through. It offered compensation of R1 000, which the ombudsman deemed fair and reasonable.
* No stay of execution
Financial difficulties prevented the complainant from meeting his bond payments, and his house was sold in execution for R13 000. He approached the bank to ask that the property be returned and a new payment plan put in place.
The bank stated that it attempted on numerous occasions to help the customer to sell the property, and several sales in execution were cancelled to allow him to meet his minimum payments, to no avail.
At the time of the sale the outstanding balance was R91 000.
The bank had no control over the price for which the house was sold, it said. It went to the highest bidder.
The ombudsman found that the bank had done everything in its power to help the home owner and that, ultimately, it had had no alternative but to sell in execution.
* Fine print, fine mess
The complainant was granted a home loan in the 1990s and a personal loan 10 years later. He was then retrenched and applied for debt restructuring. He settled the home loan account, but the bank refused to cancel the bond, as it was security for debt owing on the personal loan.
The complainant denied having put up the property as security, but the bank produced a signed copy of the bond agreement to this effect.
The bank was within its rights to refuse to cancel the bond.
* Wheel deal far from cool
The complainant’s car broke down on the day he bought it. He wanted to cancel the contract by exercising his cooling-off right. The bank told him this was not possible as he had signed the contract at its premises. It referred him to the dealer. He paid a few more instalments before stopping. The vehicle was then repossessed by the bank. The complainant wanted the bank to refund his instalments.
The ombudsman pointed out that vehicle sale agreements are entered into with the bank and not the car dealer, and advised the bank that the complainant’s claim was against it, the bank. Furthermore, in terms of the Consumer Protection Act, the complainant may return goods for repair or replacement, or be refunded.
The bank agreed to refund the instalments, which amounted to R20 000. It retained the car.