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October 8, 2007

Chip and Pin flaw leaves cardholders liable

by Gill Montia

Story link: Chip and Pin flaw leaves cardholders liable

This is Money, the financial website, has reported that the chip and Pin system, used by millions of credit and debit card holders, is flawed.

According to the website, cash withdrawals are being made daily using cards without a security chip, and it is the banks themselves that allow this to happen.

Cash machines across the UK dispense over £7 million each day and if they rejected every card with a slight defect in its chip, many customers would not be able to withdraw their money.

As a result, the system is not totally secure and fraudsters using cloned bank cards that have no chip can still steal cash.

Apacs, the industry trade association for those providing payment services, has confirmed that some of the UK’s 60,500 cash machines will allow cloned cards to withdraw money, as long as the correct Pin is entered.

For the dedicated fraudster, it is relatively simple to obtain a Pin by, for example, standing behind someone at the cash desk of a retail outlet.

Banks sometimes refuse to compensate victims of fraud because they insist the customer’s own card must have been used and that the customer must therefore be liable.

Sandra Quinn, Apacs director of communications, has referred to claims that chip and Pin is 100% secure as “just balderdash”.

The system was introduced in February 2006 and has reduced bank fraud, however, claims that it is 100% safe can unjustly place the liability for fraud with the card holder.

 

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