Advocate attacks banks over online security

By RICHARD WOOD

Consumers' Institute head David Russell has attacked banks for trying to pass off responsibility for the security of online banking.

The ANZ is reviewing a clause in its online banking conditions that requires customers to indemnify the bank for damage caused by viruses and hacking from a customer's PC if the customer has not taken reasonable security measures.

It will make a decision on the clause, which has sparked debate among online users, this week.

Mr Russell said: "The banks are increasingly placing responsibility on consumers and limiting their own responsibility. Banks should be treating their customers with greater respect."

While consumers could not argue ignorance of banks' online terms and conditions, they might have some protection under the Consumer Guarantees Act.

Mr Russell argued that if banks did not take the right precautions to protect themselves then they were not providing a reasonable level of protection.

"There would be an expectation for a bank to have some pretty good systems in place to protect themselves against catching a virus and it's not good enough just to lay it off on to the consumer that the consumer has passed the virus on."

Consumers might also have recourse under the Fair Trading Act if banks marketed the positive aspects of their internet banking, such as being easy to use and secure, but failed to point out the risks and responsibilities hidden in the terms and conditions. "If they just emphasise the good and ignore the bad they could be misleading."

An ANZ spokesman, Steve Fisher, said the clause under review had been in place for three years. He did not know if it had been enforced.

Bankers' Association chief executive Errol Lizamori said it was up to banks to introduce measures to protect their systems.

Hundreds of thousands of New Zealanders use online banking. A recent survey showed 66 per cent of 725,000 regular internet users were banking online.

A banking source said because of the huge stake the banks had in online services the actions they took to protect their systems were for their customers as well.

But there was more of a potential downside for business users. Mr Russell said internet banking would be generally covered by the Consumers Guarantee Act because it was offered as a consumer service. But banks could explicitly contract out of the act for business customers when setting up a bank account. Then it became a purely contractual matter between the business and the bank.

Business people were being encouraged more and their risk was increasing, he said.

Mr Russell has been particularly concerned with moves by the BNZ to reduce its level of security to make its system easier to use, as reported in the Herald on April 30.

The BNZ promised but failed to respond to questions over its terms and conditions.

- Additional reporting: Philip English