Proposal to Consider Wholesale Insurance for Banks and Other Credit Card Issuers to Permit Easier Write-offs for Smaller Transaction Amounts

Assoc Prof Jamus Jerome Lim asked the Prime Minister in light of the rise in fraudulent credit card transactions, whether the Government has considered encouraging more widespread wholesale insurance for banks and other credit card issuers that will permit easier write-offs for relatively smaller transaction amounts.

Assoc Prof Jamus Lim asked if banks and credit card issuers should be encouraged to obtain wholesale insurance cover for card fraud losses, so that they can write-off smaller losses incurred as a result of fraud.

There is little demand from credit card issuers to purchase insurance to cover fraud-related losses arising from their credit card portfolios.

Instead of insurance, which will lead to higher costs for consumers, it is more important for credit card issuers and customers to play their respective parts in preventing fraud.

Credit card issuers such as banks have invested considerable resources in building fraud surveillance systems and controls to combat card fraud. These systems have been enhanced over the years in response to changing technologies and methods used by the fraudsters. Today, major banks share fraud trends with one another, enabling them to continually refine fraud rules to tackle the latest fraud techniques.

Customers should keep their cards safe and immediately report to their issuing banks if they lose their cards. A timely report will cap a customer's liability at $100 unless he is subsequently found to have acted fraudulently or negligently. For online payments, customers should not disclose credit card details or One-Time PIN, or OTP, to anyone, and should practise strong cyber hygiene such as by regularly updating the security patches and anti-malware software on their devices. I find myself repeating this in Parliament and reminding people: practise good cyber hygiene.

For unauthorised payments to merchants that are not secured by OTP, banks have the right to recover the lost amounts fully from the merchants, and hence customers will not bear any loss.

We will continue to monitor the fraud situation and ensure that banks do their part to provide their customers with clear steps to take in order to protect themselves from such losses. In addition, the industry Code of Practice for Banks on Credit Cards issued by the Association of Banks in Singapore (ABS), sets out the liability of cardholders under various circumstances, is currently being reviewed to consider emerging scenarios for fraud and further risk mitigating measures.

I thank the Minister for his comprehensive response and for sharing with us about how the system is being continually refined. I have just one supplementary question for which some motivational context behind the original question, I think, would be useful.

The US has the Fair Credit Reporting Act which, by limiting the liability on consumers, has actually shifted a significant part of the burden of fraud detection and policing away from the consumer and government, and back toward credit card providers. Even, as the Minister had shared, we have some elements of this in place, I think the routine reporting of fraud and in our own Meet-the-People's sessions, when we have residents coming into us, fearful for the loss of their life savings due to fraud, makes me feel that consumers are often still in lurch for liability for unauthorised transactions on their credit card accounts.

So, to build on my question, I wonder if the MAS has considered other forms of regulation that would potentially shift the burden of responsibility away from consumers constantly just improving their cyber hygiene, and toward better deployment of fraud detection technology and tools by financial institutions because they are held more liable for fraud-related losses.

I mentioned just now, I keep reminding people to practise cyber hygiene, but that is by no means the only thing that we do. As I mentioned, there is a system that strikes a balance between the liability on the banks as well as on the part of consumers. In fact, for consumers, so long as they are not negligent, they are responsible, they report quickly, the losses they suffer is very much minimised and these are all encapsulated in the industry Code of Practice for Banks on Credit Cards. As I mentioned in my reply, it is also being reviewed.

So, I know we are all plagued by cyber crimes and scams. We are all victims of it. Every day, we open our emails, we see some of them. So, we will continue to be there and we will continue to have to strike a balance – educating but at the same time protecting consumers, but also to be fair to banks and the industry. This is something that is evolving and we will continue to work on it.