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

10 July 2020 906
“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 card to pay for food on the other side of town. I then immediately phoned the bank to stop the card and informed the bank that somebody else had my card 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.