Aussie banks deny lobbying over internet liability

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Meanwhile, the New Zealand Bankers Association’s review of the banking code of practice is nearly complete

By Stephen Bell | Wellington | Wednesday, 7 February, 2007

The Australian Bankers’ Association denies its members have been lobbying for more stringent restrictions regarding bank liability for negligent internet transactions.

Media in both Australia and New Zealand recently suggested such pressure is being brought to bear. One newspaper suggested that what Australian banks do in this area could affect the New Zealand Banking Code of Practice, which is now in the final stages of a review, as most New Zealand banks are owned by Australian companies.

The Australian Securities and Investment Commission (ASIC) is conducting a review of the voluntary Electronic Funds Transfer Code of Conduct (EFT Code), which it administers, and recently asked for submissions regarding this issue.

A recent ASIC media release says one of the key issues to be examined as part of this review is “liability issues arising from the growth and growing sophistication of internet fraud”. However, as far as the Australian Bankers Association is aware, there has been no specific bank lobbying on the question as yet.

ABA chief executive David Bell said in response to Australian media reports: “I have spoken to ASIC today [22 January] who say they are unaware of any ABA member lobbying them on this aspect of the EFT Code review.”

An Australian Bankers Association spokesman said last week there had been no change to that position since then. “We are still consulting with our members,” he said.

Meanwhile, the New Zealand Bankers Association’s review of the banking code of practice is nearly complete. It will be issued within “weeks rather than months”, says chief executive Alan Yates.

There are a few points which association members are still discussing and some of these relate to responsibilities in the online banking environment, he says. But he did not want to release information prematurely on the code.

The public comment period for the Australian code closes on April 13. However, little time remains for Australian banks to raise any concerns that might influence the revised New Zealand code before it is finalised.

Clayton Wakefield

The existing NZBA code already allows banks to disclaim liability for fraudulent transactions where the customer has engaged in fraudulent or been negligent. Actions that may be considered negligent include: “Selecting unsuitable PINs or passwords [for example, birthdates or family names]; failing to reasonably safeguard cards; keeping written records of PINs or passwords; parting with cards and/or disclosing PINs or passwords to any other person; failing to take all reasonable steps to prevent disclosure to any person when keying-in PINs or passwords; or unreasonably delaying notification to [the] bank of the loss or theft of cards, or of the actual or possible disclosure to any other person of PINs or passwords.”

Hot topics not specifically covered include visits to phishing sites and inadequate protection against viruses and Trojans on customers’ computers.

Spokespeople at the BNZ’s and the ANZ’s New Zealand head offices declined to comment last week on any input they had made to the local code.

ASB Bank spokesman Clayton Wakefield says: “In New Zealand, there is no industry-wide policy on reimbursing customers affected by internet fraud. ASB makes a decision on a case-by-case basis and has no plans to change this policy.”