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Payment system – inability to install on website – long delay – loss of potential sales
Eftpos card – unauthorised withdrawals - reasonable care of card and pin – reparation – bank’s liability – easily identifiable pin – breach of conditions of useMr O was in the business of selling a CD-ROM containing specialised information. In March 2004 he found information on the website of an overseas bank describing a payment system which allowed customers to purchase products online using a credit card. He requested this system from the New Zealand arm of the same bank to enable him to sell the CD-ROM to customers via his website. Mr O signed and completed the merchant agreement given to him by the bank. He was then provided with a manual payment system, which the bank said he could use temporarily until the automated online product became available in four to five weeks’ time.
Five weeks later the bank emailed Mr O instructions for linking his website with the bank’s system, along with electronic files containing samples of the required computer code. When he opened the files, he found that the codes were not compatible with the product he had requested. The bank had apparently made an incorrect assumption about the software Mr O would be using.
After four months and considerable difficulty in communicating with the bank’s agents, there had been no apparent progress in establishing the automated service, nor had Mr O received any information on how to upgrade his web links to the bank’s service. He was finding the manual system inadequate, and complained to the bank. He was advised that the bank was now ready to provide him with both the information that he needed and the support necessary to start online payments.
By this time six months had elapsed since Mr O had ordered the system, and he was still unable to install it on his website. He wrote to the bank saying that he was neither willing nor able to continue the process. He asked the bank to take no further action with the installation of the online payment system. He suggested that the bank should compensate him for the considerable time and money that he had spent since he first entered into a contract to purchase the payment system. Although the bank acknowledged that its communication with Mr O could have been better, it was not prepared to accept responsibility for his inability to install the system, and thus his financial loss.
Mr O asked me to review his complaint. Along with the inconvenience that he had suffered, he claimed that he had failed to secure over $20,000 in potential sales.
It was very clear to me that the bank had been responsible for lengthy and unacceptable delays. An e-commerce development company was commissioned to review the suitability of the documentation, instructions, and software provided to Mr O. It found that, although the voluminous 150-page documentation was complete, Mr O’s bank had not specifically drawn his attention to those sections of the documentation he most needed to refer to. The reviewing company also noted that the sample files provided by the bank were applicable to web server software different to that used by Mr O.
Under the Code of Banking Practice a bank must provide customers with timely information to facilitate their understanding of how its products and services operate. It was essential for Mr O to have correct and sufficient documentation to enable him to operate the banking service that he had contracted to install.
I found that the bank’s failure to provide Mr O at an early stage with any information about its requirements for the effective operation of the system amounted to misrepresentation on its part. Although the bank’s foreign website did contain substantial information about the system, I found this misleading, as it was not entirely relevant to the New Zealand system. The bank continued to supply information, including installation instructions, that was not compatible with the system requested by Mr O.
As the bank had contributed substantially to the inability to install the requested online payment system, I found that it should reimburse Mr O an amount of about $15,000 for all potential sales over a nine month period (calculated in accordance with an agreed formula). I also recommended payment of $2,000 for the inconvenience caused by the bank. The bank and Mr O accepted my recommendations.