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CBN explains directive on trapped ATM cards

By BusinessNews Staff on May 18, 2014

The Central Bank of Nigeria (CBN) Thursday shed more light on its directive to banks to render payment cards trapped in their Automated Teller Machines (ATMs) ineffective by perforating them before returning same to the issuing bank.

Responding to questions from journalists on the sidelines of the Nigerian Electronic Fraud Forum (NeFF) stakeholders’ meeting in Lagos, the Director, Banking and Payment System Department, CBN, Mr. Dipo Fatokun described the policy as a global practice.

He pointed out that the policy does not only apply to other banks’ ATMs alone, saying that cards trapped in issuing banks’ ATMs would also be perforated.
According to Fatokun, the central bank introduced the policy in order to protect bank customers.

“Cards can be trapped in an ATM for various reasons. For example, when a customer inputs his PIN three times and didn’t get it right, the card can be trapped. It could also be due to the fault of the ATM or due to the nature of the card.

“When I mean nature, I mean maybe you sat on the card and it becomes bent and if you attempt to use it, it could be ceased. But why did we come out with the policy that banks should perforate?

“We did that because you know that when these cards are trapped, there is a process of returning the card to the issuer, that is the bank that issued the card originally and this process goes through various hands before it may get back to the owner of the card,” Fatokun added.

He noted that because of the long process, there could be the possibility of a compromise.
Continuing, he said: “Somebody could say they won’t know the PIN. But there is what is called ‘Card Not Present’ transactions in which case you only need the information on the card and don’t need the PIN.

“So anybody who has the information on the card will be able to do ‘Card Not Present’ transactions. So that was why we came out with that regulation such that when a card it trapped, the issue of compromise will not be there.”

However, he pointed out that the central bank is collaborating with banks to lessen the burden of the policy on cardholders.

He said: “We are working with the banks to ensure that when these cards are trapped, not because the customer did something wrongly, and a new card is to be issued to the customer, we are discussing on how it would be done such that the burden would not fall wholly on the cardholders.

“We have also discussed with the banks to ensure that cards that are trapped can be communicated electronically between the acquirer on which the card was trapped and the issuer of the card.”

Furthermore, he noted that for cards trapped in issuing banks’ ATMs, if the machine is located within the premises and the cardholder goes into the banking hall to report the situation, the bank may decide to retrieve the card immediately and return same to the customer without perforating it.

However, for trapped issuing banks’ ATMs located off-site, he said the financial institution may decide to invoke the provision of that guideline to issue the customer another card and perforate that one that was trapped.

[This Day]

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