law
5 Feb 2018

Bankers' Assn backs down over protection for fraud victims

From Nine To Noon, 9:08 am on 5 February 2018

Bank customers who fall prey to internet fraud will be protected by a specific clause in a new banking code, after the Bankers' Association backtracked on removing it.

Online shopping concept

Photo: RNZ

The association is drafting a new Code of Banking Practice it says will be simpler and more accessible to customers.

But Consumer New Zealand's chief executive Sue Chetwin had objected to the initial draft, saying it was over-simplified and not clear about who would be responsible for compensating defrauded customers.

"It basically was going to be up to the banks to have it in their policies and we just didn't think that was good enough," she said.

"It's such a critical part of people's banking experience now to be online, and fraud is huge, and it was too big to be sort of, hidden in the terms and conditions that a bank might choose to have."

It was good the new code was principles-based, meaning it would remain relevant in a changing digital environment, Ms Chetwin said.

However, a clause as important as that needed to be explicit, she said.

"We do think it will cover all types of fraud, from hacking attacks to anything else, but you can't just take it out then expect consumers to know what will happen - it has to be an aspiration in the code."

Bankers' Association chief executive Karen Scott-Howman said the association never intended to remove the provision.

"What we had thought is that we'd actually covered it under our general principles of fair and reasonable treatment and also our privacy and security principle - it was absolutely always our intention to retain all of the material that had been in our previous code," she said.

"We're working on making the changes and we've taken onboard the feedback that we should retain that explicit statement."

Massey University banking expert Claire Matthews said it was in the banks' best interests to have a code their customers were happy with.

"There is the possibility that if they do water it down too much ... they do run the risk that the politicians will step in and put in place something that is much less flexible."

The Bankers' Association said it would aim to publish the re-worded code in the next few months.