Barbara Buchanan delves into the fine print and finds that consumers have almost no protection against bank fraud
Sadly, this story, that could happen to any unsuspecting local or expat in Colombia, will make readers from North America or most European countries feel spoiled to hail from places in which numerous consumer protection agencies actively work to defend the rights of the individual.
For – as English teacher Robert Churchman, from Auckland, New Zealand has found out – those organisations don’t function effectively in much of the world. Colombia is one of those countries where regular people are being let down by ineffective banking controls.
When he looked at his bank statement last July and found a fraudulent COP$700,000 cash withdrawal from Fusagasuga at a time when he had been in Bogota, he assumed the bank would check their security and reimburse him – as they would in his home country. He was in for a shock.
He immediately reported the incident to Banco Caja Social (BCS). He had evidence that he had used his card in Bogota on that weekend, and that he had used the Fusagasuga cash point the week before to make a small withdrawal. The bank actually had CCTV image of an ‘unknown’ woman at BCS’s Fusagasuga ATM taking out money at the precise date and time of the disputed withdrawal.
Even so, BCS rejected his claim. After investigating the case, they said that the initial Fusagasuga transaction was made with a chip and pin card at one of their ‘secure’ ATMs and so it would not have been possible to clone the card.
We spoke to the chief executive of Caribbean Electronic Payments Ltd, David Cole, who maintained that this argument didn’t add up. The expert, who advised UK bank Lloyds TSB on their introduction of chip and pin in the 90s, explained that a camera could be inserted above the screen to capture data. “When you push your card into the reader it photographs the front of the card with the account number, expiry date and captures when you key in the pin. They can produce a counterfeit magnetic strip card with all the essential information on the magnetic strip and change the service code from chip and pin to a magnetic strip card which makes it able to be used.”
In addition, Churchman felt that the bank should have taken into account his previous behaviour as a customer. “I had on no occasion withdrawn an amount greater than COP$400,000. The withdrawal of COP$700,000 was entirely out of character to the regular movements in the account”. The notion is supported by the consumer protection director at Superintendencia Financiera, María del Pilar de la Torre, who told The Bogota Post banks had a duty to “know their customer”.
Ultimately though, upon further investigation, all of the arguments about the validity of the claim become moot. When you open a debit or savings account in Colombia, the legal wording of the contract lets the bank off the hook from the outset.
Dr Juan Camilo Cruz Palomo, a lawyer specialising in financial issues, says under law 1328 of 2009, banks have to clearly state the consumer’s contract conditions when they open an account.
“Needless to say, generally the banks exclude responsibility in the contract for opening a bank account, stating that fraud and other security problems will not be enforceable against them,” he warns. “It’s almost like a reversal of the burden of proof to the detriment of the consumer who is the weakest part of the contractual financial relationship.”
Cole believes that this question of liability is key. If the consumer bears the brunt of liability, it lessens the banks’ motivation for spending money to tackle the problem. “It makes them less vigilant if they are less liable. A good bank will do full fraud checking and they will check their ATMs on a regular basis. This costs money.” He goes on to explain that if they can get away without repaying the customer perhaps they won’t invest in such efficient software.
On top of which, even if you are successful in taking your case up with the ombudsman, only a handful of banks will actually follow their findings.
Churchman then took the matter up with the bank’s internal ombudsman, an independent qualified lawyer, whose investigation concluded there was ‘insufficient’ evidence to show the bank had “breached its legal and contractual laws”. The ombudsman, Martha Victoria Osorio Bonilla, added her role was “not to encourage debates as to the type of evidence needed to establish civil liability or penalties”.
Even if the internal ombudsman had decided in his favour the decision would not have been legally binding. According to the Superintendencia Financiera, out of Colombia’s 33 different banks only Bancolombia, BBVA and Colpatria have elected to follow their own ombudsmans’ decisions.
Undeterred, Churchman went to the Superintendencia Financiera, the government regulator, whose decisions are actually legally binding. However, the regulator said it supported the bank’s decision not to refund the money. BCS pointed out in its defence that: “The bank will not assume responsibility for whatever operation may have been made with the card until it’s annulled.”
Having exhausted all the banking avenues, the only option left would be to go through the courts. However, Colombia’s court system is notoriously slow to process cases often taking years for cases to be heard with a low percentage of convictions.
General Manager of security firm Omnitempus, William Ramirez, took legal action against someone who was faking his signature back in 2006. The fraudster had filled up his car with petrol using Ramirez’s account and racked up a bill of more than one million pesos. Ramirez had already reported the case to the Fiscalía prior to filing his lawsuit. His experience with the Colombian justice system was frustrating. “I wish I hadn’t bothered. It took so long for the case to be heard. Our justice system doesn’t have enough people to investigate crimes. We pay a lot in taxes for the justice system which is offering an inadequate service so there’s little incentive to file a case.”
So, with the banks evading their responsibilities, and the court too slow to be effective, Churchman, like many victims of fraud, is left with no further avenues to explore. It seems the best that consumers in Colombia can do is take measures to protect themselves against fraud – because they can’t expect the banks to help them afterwards.
By Barbara Buchanan