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ombudsman news

issue 9

September 2001

disputed cash machine withdrawals

Five or so years ago, disputed cash machine withdrawals were a hot topic. More recently, this type of complaint has tailed off, but we do still get a regular flow of them. We therefore thought it would be useful to touch on a few of the problems which continue to crop up.

To begin with, however, it is important to get things in proportion. Millions of cash machine withdrawals are made every day. But we only ever receive complaints about a tiny percentage of them.

Many of the complaints we get are not about the operation of the machines themselves. They are about whether it is the firm or the customer who should bear the loss when a thief is able to use the card because the customer has written down the Personal Identification Number (PIN).

So, typically, the problems fall into two broad categories:

  • the customer still has the card, but does not remember making the withdrawals;
  • the customer reported the card lost or stolen, but the firm holds the customer liable and alleges the customer was guilty of "gross negligence".

When firms refuse to reimburse the disputed withdrawals, customers turn to us.

Here are a few recent examples:

case studies - disputed cash machine withdrawals

faulty recollection

Mr H wrote to us about 26 cash withdrawals that were made from his account. He did not remember making any of them. They totalled £2,400, were spread over almost a year, and were made from six different cash machines - all of which were only a few miles apart, and fairly close to his home.

When he complained to us, we first of all examined the transaction listings - created when the withdrawals were made. It was clear from these listings that each withdrawal had been made using the card issued by the firm - not some duplicate or replica card. There had been no incorrect PIN entries and each withdrawal had been made successfully at the first attempt. Furthermore, there had been no "technical malfunctions" at any of the cash machines at around the time the withdrawals were made.

Mr H insisted that he had not made the withdrawals. He said he had always had control of the card, had destroyed the original PIN notification and did not keep a written record of the PIN.

Mr H and the firm were bound by the card conditions. The firm was also bound by the Banking Code - which prevails over the card conditions if there is any conflict between the two. The firm did not allege that Mr H was fraudulent - which would have entitled the firm to rely on the card conditions and debit his account with all of the withdrawals.

But the firm said that each withdrawal had been made with Mr H's card, and Mr H's PIN. So, if he had not made them, he must have authorised someone else to do so. There was therefore no reason for it to give him any money back.

We concluded that if what Mr H said about always having control of the card was correct, then the card could not have been used without his consent. Even if he was wrong, an unauthorised third party would have had to: find out the PIN; remove the card from Mr H; make a withdrawal; return the card; and do all of this 26 times without Mr H noticing.

All of this seemed unlikely. We decided that Mr H (who was quite elderly) had made the withdrawals himself, or authorised someone else to do so, and had then forgotten. So we did not require the firm to give him any money back.

customer kept note of PIN

When Mr T's wallet was stolen, he reported the loss of his American Express and Visa cards, but forgot about his cash card. By the time he remembered it and reported it to the firm - the following day - four withdrawals, each for £250, had been made. These withdrawals were made very close together - just before, and just after, midnight.

The transaction listing showed that, before the first withdrawal was made, there had been an unsuccessful attempt when the wrong PIN was entered. And there was another unsuccessful attempt after the second withdrawal - because the daily withdrawal limit of £500 had, by then, been reached.

Mr T accepted that he had kept a written note of his PIN in his wallet, but said that it had been "disguised". No one doubted that he was the victim of fraud. But who was liable for the withdrawals- The Banking Code limits customers' liability to £50 for withdrawals made before a lost or stolen card has been reported missing provided (amongst other things) that a note of the PIN was not made on the card, or kept near it.

Because Mr T rarely used the card, and because the thief was able to make the withdrawals after only one failed attempt, we decided Mr T had kept a note of the PIN near to the card, in an undisguised or poorly disguised form. The firm was therefore entitled to debit his account with the four withdrawals.

when was the card stopped-

Mrs E was very worried when, after she had reported her card stolen, the firm debited her account with four withdrawals totalling £350.

Her handbag had been stolen while she was out shopping at a local supermarket. She realised almost at once what had happened and, with the help of the supermarket staff, she phoned the firm to "stop" her card. She recalls making the call at about 4.45pm.

The firm's records showed that the withdrawals were made that same day, between 4.58pm and 5.00pm. But the firm had told Mrs E that the "stop" had not been put on her card until 6.20pm, although it did not explain why. And it refused to give her the money back because it said she had kept a written note of her PIN with her card.

After we got involved, the firm told us that its "lost/stolen card report form" had been completed at 5.04pm. But when we asked the firm for its recording of the call Mrs E made from the supermarket, it said the tape was no longer available. That was worrying. The firm should not have destroyed the tape until the complaint had been sorted out, and it knew within six weeks of the withdrawals that Mrs E intended to get in touch with us if it did not sort out the problem itself.

Because the firm could not say exactly when it got the call - and there were discrepancies on the "lost/stolen card report form", we could not be confident that the true time of the call was 5.04pm. We were more persuaded by Mrs E's recollection of the time when she reported the theft of the card, which was marginally before the withdrawals were made. We therefore told the firm to give Mrs E her money back.

ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.