Banks and building societies face their most serious legal challenge from customers over cash dispensing automated teller machines (ATMs), writes Barbara Ellis.
This is in spite of words of comfort from the Building Society Ombudsmen this week. They welcomed the new £50 limit introduced by the Code of Banking Practice, on losses from unauthorised use of machines unless the bank can prove fraud or gross negligence.
Some 400 customers assembled into an action group by J. Keith Park, solicitors, of St Helens, Merseyside, are to seek a High Court ruling, within the next two to three weeks, that banks and building societies operating teller machines are in breach of contract because the machines are suseptible to error and fraud.
Each of the 400 will make detailed claims for losses through alleged unauthorised withdrawals ranging from £90 to £13,000 and totalling close to £500,000. All the claims have been rejected by banks and building societies.
For example, Barclays stated this week that out of its 15 million machine transactions each month, fewer than one in every 250,000 is disputed -- which would imply 60 disputes a month. Dennis Whalley , of J.Keith Park, says he has deduced, from ATM dispute cases that disputes have been running close to 9,000 a month.
Barclays says there is no correlation between the volume of teller machine disputes and the reference numbers which relate to computer files.
For years banks and building societies have insisted that the ATM systems are completely secure and that money can only be withdrawn with the use of a card and personal identification number (PIN).
The obudsmen have almost invariably backed the insitutions in rejecting claims from customers who detected "phantom" unauthorised withdrawals, saying that they must have unwittingly lost their cards, disclosed their PIN, or been a victim of a dishonest family member.
However, the 1989 Jack report on banking acknowledged that the PIN system was open to fraud and last year an engineer employed by the Clydesdale Bank confessed to removing £17,000 from customers' accounts by arranging phantom withdrawals using a hand-held computer.