Canadian Imperial Bank of Commerce is locked in a legal battle with a customer over an $81,276 Visa charge for the purchase of a car, in a case that delves into the security of the new chip-and-PIN credit cards.
Jason Monaco, a founder and managing partner at First Canadian Capital Corp., a small Bay Street firm that deals in investor relations, has sued CIBC in Ontario Superior Court, alleging that the charge for which he was billed was made with a fake credit card and he should not be responsible for it.
CIBC has countersued, noting that Mr. Monaco's Visa was a chip-and-PIN card and arguing that it is not possible to process a chip-and-PIN transaction without both the Visa card itself and the customer's personal identification number.
Chip cards, which use a microchip and PIN number rather than a magnetic stripe and signature, were rolled out in Canada in recent years after much planning by banks, credit-card companies and retailers. They were designed to boost the security of transactions. On its website, Visa says that "the microchip is embedded in your card and is virtually impossible to duplicate."
In his statement of claim, Mr. Monaco, who had a high spending limit on his card, alleges that his problems started a year ago, when he checked his Visa balance and discovered two transactions he says he didn't make. He says that he reported them immediately to CIBC and that his card had not been lost or stolen but remained in his possession at all material times.
On June 9, 2010, his CIBC Aerogold Visa Infinite card was charged $81,276 for a car purchased in Ajax, Ont., and on June 10 a $4,972 charge was made in Vaughan, Ont., ostensibly for "rims and tires," Mr. Monaco states in his statement of claim. It is not known what kind of car was purchased, but the court documents describe it as a "race car."
CIBC's fraud-loss prevention and investigations department investigated both transactions and determined that the second one was fraudulent and removed the $4,972 charge from his account.
Mr. Monaco alleges that the bank refused to provide him with the documents it obtained in its investigation, so he went to the place where the car was bought and got a copy of the receipt and invoice for the transaction. He alleges that they included a manual credit-card imprinter receipt taken from a counterfeit credit card that had his Visa number, that it read "Mr. Jason Monaco" rather than "Jason C. Monaco" and that the signature on the receipt was forged.
Mr. Monaco alleges that there is evidence something fishy was going on and that a counterfeit card had been made, so he should not be responsible for the charge.
CIBC spokesman Rob McLeod said "our records show that this was a chip-and-PIN transaction. This means Mr. Monaco's personal card and personal PIN number were used in carrying out this transaction. As a result, Mr. Monaco is liable for the transaction."
The bank's statement of defence and counterclaim similarly says that the $81,276 charge was made using Mr. Monaco's card and PIN. "In the alternative, if the June 9 transaction was completed without the plaintiff's PIN but with both the plaintiff's Visa card and the computer hardware and software required to circumvent the PIN authentication protocol, then the transaction was completed using a card the plaintiff had either (i) authorized that person to use or (ii) had failed, as of the June 9 transaction, to report lost or stolen," the bank said.
Both sides are relying on the cardholder agreement, which lays out when a customer is responsible for a purchase. Among other things, as an example, the agreement says that cardholders could be responsible for any transactions that take place before they report a card lost or stolen if they have chosen a PIN that includes their, or a close relative's, birthday, phone number or address or any other number that can be easily obtained by someone else.
CIBC noted in court documents that it has told Mr. Monaco to pay the $81,276 and that balances are subject to interest.