Page 46 - Q&A

How far is a bank liable if you lose your credit
card and pin?

June 2020
“I lost my wallet with my credit card in it and a piece of paper on which I wrote
down my new card pin number. Because I was hoping I may still find my wallet,
I didn’t immediately stop my bank card. A few hours later somebody used my
Commercial bank to stop the card and informed the bank that somebody else had my card
card to pay for food on the other side of town. I then immediately phoned the
and pin. The bank told me in that case the bank would not be liable for my
losses. Is this true?”

Generally, when unauthorised transactions have taken place on a bank card,
the bank will investigate to ascertain how the transaction had occurred and
who was liable for losses incurred. In general, most card agreements entered
into between a bank and cardholder includes provisions that the cardholder
has a contractual obligation to keep the card safe and not disclose the card
pin to anyone. The bank also has a contractual obligation to mitigate losses in a
case where the cardholder informs them of a fraudulent transaction.

Our courts have found that a cardholder can be liable for losses if the
cardholder acts negligently by for example, disclosing the pin. This was
determined after taking into account the provisions of the Code of Banking
Practice in South Africa read together with the contract concluded between
the bank and the cardholder. Exceptions may be where card thieves have
obtained the pin by recording the cardholder when using the pin etc. and the
Ombudsman for Banking Services indicated in a Card Cloning Bulletin that it
cannot reasonably be expected that a cardholder must search for things like
hidden cameras.
Where a card pin was obtained for example by the cardholder storing the
pin in a wallet with his card and the card and pin were used to conclude
transactions, it will probably stand to good reason that the cardholder
was negligent in this respect and the bank would not be liable for the
unauthorised transactions, taking into account the contractual terms between
the bank and the cardholder.

Banks do however generally have an obligation to mitigate losses, subject to
the circumstances of each case, and if a cardholder for instance informed the
bank that the card and pin has been compromised or stolen and the bank fails
to stop the card, then the bank could be held liable for losses ensuing.
Each case will however have to be assessed on its merits and the refusal of
a bank to accept liability for losses can be challenged by a court or possibly
the Ombudsman for Banking Services. In your case the circumstances appear
to point towards negligence on your side which will preclude the bank from
being liable for the unauthorised transaction on your card.

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