Banks bid to fight credit card fraud

Date: 12/10/00

SOME of the world's largest banks are exploring ways to address the growing problem of credit card fraud in the EU.

The move comes in response to a request from Consumer Protection Commissioner David Byrne, who has asked both credit card issuers and member states to assess the extent to which consumers in the Union can challenge questionable charges which appear on their statements.

Officials are concerned that banks lack clear policies on 'chargeback' systems, which allow consumers to dispute a transaction through the bank which issued the card. Under this system, the issuer - which normally has branches in the purchaser's home country - acts on behalf of customers with complaints about not receiving the product or service they paid for or about overcharging. As a result, the cardholder does not have to complain directly to the retailer, who may be located in another country.

"The best indication for a consumer that payment cards are safe is that he will not be held liable if something goes wrong," said Byrne recently. The Commissioner added that although technical advances such as chip cards had been designed to prevent fraud, few consumers understood their significance.

Supporters of the chargeback system claim that it can also benefit banks, arguing that the cost of operating the scheme is easily offset by increasedprofits as consumers are encouraged to use their cards.

Byrne has asked the heads of Visa, Europay International and American Express as well as experts from EU member states to consider what can be done to encourage chargebacks in Europe, where the practice is far less common than in the US.

Late last month, Visa reported that credit card fraud was surging in Europe, costing the company more than €320 million in the year ending March 2000, up from more than €200 million in the previous year.