Banking by the numbers

By MARK FRYER

Armed with a PIN number or password, there's not much you can't do with your money these days.

Just by punching in the right combination of keys you can buy things, withdraw cash, pay bills, move money between accounts and generally do almost everything that used to require standing in line at the teller's window.

All very convenient - until someone else gets hold of your card and your PIN number or password.

There's the obvious danger, that your account will be emptied before you notice the card is missing. Depending on the type of account, whoever has your card may even be able to run up debts in your name.

The latest report from the Banking Ombudsman points out another danger - your account could be used as a clearing house for stolen or forged cheques, which are deposited and then promptly withdrawn via an ATM machine.

Once you notice the problem and tell the bank, you may then be faced with a messy disagreement over who should pay for the damage.

That question is governed by each bank's terms and conditions, and by the Code of Banking Practice. The code sets out the standards that members of the Bankers Association - which includes the big retail banks - agree to follow in their dealings with customers.

That code is now going though a review, which - if the draft developed by the association is adopted - will result in customers taking on some new responsibilities for safeguarding their PIN numbers and passwords.

The draft code says customers should not choose unsuitable PIN numbers and passwords, such as:

* Birth dates.

* Sequential numbers (1234, for example).

* Easily identified number combinations (1111, for example).

* Parts of your phone number.

* Parts of the numbers printed on any of your cards.

* Easily accessible personal data, such as a driver's licence number.

* The names of family, pets or street names.

* The month of your birth.

* PIN numbers or passwords you use for some other purpose, such as security systems, lockers or mobile phones.

If you choose an unsuitable PIN, the draft code warns, you might have to pay some or all the cost of any unauthorised use.

To a large extent the draft code repeats obligations which already exist, although in more detail than in the existing code.

But the ban on using PIN numbers or passwords you use for some other purpose is new. If that change is accepted, and the bank finds out that the PIN number on your stolen card is the same as the one you use for your mobile phone, for example, it might refuse to reimburse you for money stolen from your account.

The draft code also says banks will explicitly warn customers against keeping identifiable records of PIN numbers or passwords, writing them down, negligently disclosing them in any way or revealing them to anyone in apparent authority - even bank staff or police.

It isn't all one way; the draft code also spells out the banks' responsibility to customers - requiring them to do things such as informing you what functions a card has and sending out cards separately from any PIN number or password.

It also says you won't be liable for any losses suffered before you received your card. But that doesn't apply if your card falls into the wrong hands because you didn't tell the bank of a change of address.

That's a change from the way things are now, says Banking Ombudsman Liz Brown. At present, she says, such losses are borne by the banks, even if the customer had something to do with the fact that he or she did not receive the card.

The draft code even goes as far as suggesting not only that customers must tell their bank of a change of address, but must make sure their bank has acted on that information - a requirement Ms Brown says is "taking it a good deal too far".

The draft revised Code of Banking Practice is open for submissions until March 1, when it will be reviewed by Sir Ian Barker, the chairman of the Banking Ombudsman Commission.

Copies of the proposed code are available on the Bankers Association website or by contacting the organisation on (04) 472-8838

The revised code is due to come into effect next November, replacing the present code, which was adopted five years ago.

NZ Bankers Association

* Contact Personal Finance Editor Mark Fryer at: Business Herald, PO Box 32, Auckland. Phone: (09) 373-6400 ext 8833. Fax: (09) 373-6423. e-mail: mark_fryer@herald.co.nz.