MISTAKEN payments and poor protection for small business have emerged as the main issues in the Australian Securities and Investments Commission’s review of the Electronic Funds Transfer code of conduct. Consumer and business groups say the code should be made mandatory and applied to all electronic payment service providers, including internet-based facilities such as Pay-
Pal and Google Checkout.

A submission by Care Financial Counselling Service and various related groups includes 10 case studies that suggest the code’s complaint handling provisions have not operated satisfactorily from the consumer’s point of view.

The power imbalance that exists between individual customers and large financial service providers is readily obvious,” it says.
“It is even more pronounced when the consumer has some vulnerability or disadvantage.”

Meanwhile a submission from Galexia on behalf of CHOICE, the Consumer Action Law Centre and the Centre for Credit and Consumer Law, warns that the onus is on financial institutions to ensure their internet banking systems minimise basic errors.
“We are concerned at the ease with which mistaken transactions can occur in internet banking and the difficulties subsequently faced by customers when they do occur,” it says.

“Current terms and conditions are particularly harsh in relation to mistaken payments. “Some banks, such as Westpac, will not even reverse mistaken transactions when both transactions are with the same bank.”

Paul Hobson says mistaken online payments have become a serious problem here because banks rely on the account number only for transactions, rather than matching the account number and name, as international banking systems do.
As a result, many customers experience losses simply because they have incorrectly entered the number of the receiving account.
If you match the number with the name as well, there’s less chance of an error,” Hobson says.
The Banking Ombudsman has pointed out that mistaken payments are not an issue elsewhere, because there are better checking
mechanisms.”

The ABA says it would be too costly to introduce system changes.

Care director David Tennant says consumers are placed at risk of transferring funds incorrectly due to inadequacies in internet bankingbinterfaces.

“Currently, unless the institution makes the mistake themselves or volunteers for a resolution, the consumer will not be reimbursed without assistance from the Banking Ombudsman,”

he says.
“Clearly, a more effective system is to expose any potential problems with a transfer at the payer’s bank level before the transfer takes place.”
Tennant says a third-party bank often refuses to provide details of the recipient of a mistaken payment, citing privacy laws as the reason.

Any chance of recovering the payment falls to the honesty of the recipient,” he says.
That is clearly an unintended outcome.”

Tennant proposes that a scheme similar to Chargeback be considered.
If such a system were adopted, where consumers who receive mistaken payments access some or all of those funds in good faith, appropriate repayment arrangements could be reached, especially for those experiencing financial hardship.”

Extracted from The Australian

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