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Dealing with Unauthorised Transactions

Have you ever come across a transaction on your bank account that you don't recognise? Sometimes these mystery transactions turn out to be legitimate, but other times they don't. Having an unauthorised transaction appear on your account can be a worrying experience, particularly if you're unsure whether you'll ever see your money again.

What is an Unauthorised Transaction?

An unauthorised transaction is one that was not authorised by you or someone who is authorised to use your account (i.e. an additional account holder or person with an Authority to Operate (ATO)). Whilst an unauthorised transaction may be fraudulent, it could also be a result of merchant error, equipment failure or something else entirely.

Example: You log in to Netbanking and notice a payment has been made from your transaction account that you hadn't authorised; You are absolutely sure no-one else had authority to use your account. In this instance, the transaction was likely unauthorised.

Keep in mind, sometimes what can appear to be an unauthorised transaction, may actually turn out to be an authorised one, even if it's fraudulent.

​Example: ​You provide your account details to a third party and an unwanted transaction occurs.  The transaction may be more expensive than you expected or you didn't receive what you paid for. 

An extremely common form of fraud involving authorised transactions is called the 'Subscription Trap'. It pays (literally) to be aware of this and the potential consequences.

Watch out for Subscription Traps!

We've all seen those internet landing pages online where you're offered a 'free product trial' in return for providing contact information and credit card details. Well quite often they're not what they seem.  Often when you sign up, you'll start receiving unwanted charges on your credit card.  

Subscription traps are designed to entice you to jump straight into ordering a 'free' trial without looking at the terms and conditions of the deal.  These T&C's are often available to read, but are overlooked due to complacency or buried away so you won't notice them. You may be thinking, "Why would I even need to read the terms and conditions of a 'free' trial? It's free right?". Wrong.

The T&C's will often explain you are enrolled for a 'free trial period' and that once it expires, you automatically become a subscriber to their product or service.  Unfortunately the T&C's may also state you give authority for your credit card to be charged for this ongoing subscription.

By the time you notice the transactions on your statements and take action to cancel the subscription or credit card, the damage has already been done and you could be out of pocket for hundreds or even thousands of dollars! Worse still, because you authorised the transaction, recovering the money can be extremely difficult.

How can your Financial Institution help?

Your financial institution will have a process in place to help you resolve suspected unauthorised transactions. The process will likely involve:

  • Verifying the transaction details with you, checking to make sure the transaction wasn't actually authorised
  • Cancelling the relevant debit or credit card immediately
  • Investigating the merchant
  • Lodging a chargeback request to return the money to your account

Getting Your Money Back

In the case of an unauthorised transaction, your financial institution can request a chargeback on your behalf from their clearing house or the recipient's financial institution. If the transaction was unauthorised, then the money will likely be returned to your account. However with authorised transactions, the chargeback will be rejected. In this case your financial institution will advise you of alternative options for recovering your money.

Whilst your financial institution will help to retrieve money lost as a result of an unauthorised transaction, there are instances where retrieving the money becomes impossible. When this happens, your financial institution will likely use the ePayments Code for guidance on what happens next. To find out if your financial institution subscribes to the ePayments Code, check out ASIC's Register of Subscribers

The ePayments Code covers electronic payments, including ATM, EFTPOS and credit card transactions, online payments, internet and mobile banking, and BPAY. Liability for unauthorised transactions using these channels is included within the Code.

Generally speaking you won't be responsible for any losses caused by:

  • Fraud or negligence by a third party (i.e. a Shop Owner)
  • A debit or credit card that is faulty, expired, cancelled or has been forged
  • Unauthorised Transactions that happen on a Debit or Credit Card before you received you PIN number 
  • Incorrectly having your account charged more than once by a business
  • PayPass transactions where a PIN is not required
  • A faulty ATM or other system errors such as Net Banking 

However you may be liable for some or all of the losses where:

  • It can be proved that you probably contributed to the loss through fraud or breaching the pass code requirements
  • You leave your debit or credit card in an ATM and the card is then stolen, as long as the ATM incorporates reasonable safety standards
  • You unreasonably delay reporting a lost or stolen card to your financial institution
  • You unreasonably delay reporting unauthorised transactions on your account to your financial institution
  • The transaction was authorised
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