Consumer Protection Victory: Credit Card Fraud Liability Settled.


23 October 2024 Civil Revision >> Civil & Consumer Law  

In a significant ruling of M/s. Sbi Cards & Payment Services Ltd. v/s Durga Chauhan., concerning consumer protection and credit card fraud, the National Consumer Disputes Redressal Commission (NCDRC) has upheld the decision of the lower fora, holding a subsidiary of State Bank of India (SBI) liable for a fraudulent international credit card transaction. The case, brought forth by a consumer (Respondent) against the SBI subsidiary (Petitioner), centered on a disputed transaction of USD 700 (INR 47,946.55) at "Paypal Keanneswart" in October 2017.

The Respondent reported the transaction as fraudulent immediately upon receiving an SMS notification, as she did not receive the mandatory One-Time Password (OTP) for authorization. Despite her prompt action and subsequent blocking of the card, the Petitioner reversed the temporary credit initially granted, demanding payment of INR 67,689.12 from the Respondent.


 

 

The District Consumer Disputes Redressal Forum, Gurgaon, ruled in favor of the Respondent, directing the Petitioner to credit back the disputed amount. This decision was later upheld by the State Consumer Disputes Redressal Commission, Haryana. Aggrieved by these concurrent findings, the Petitioner filed a Revision Petition (RP) before the NCDRC, arguing that the transaction was valid, and that the Respondent was falsely claiming fraud to evade liability.

The Petitioner contended that the transaction was an online international one, where OTP is not mandated by RBI guidelines. They also presented a chargeback validating document from the merchant, claiming it confirmed the transaction was conducted by the Respondent. However, the Respondent countered that she had consistently reported the fraud and that the transaction, being a donation to an unknown entity, was clearly not authorized by her. She further argued that the Petitioner had not adhered to RBI guidelines regarding fraud handling and had failed to provide evidence of a thorough investigation.

The NCDRC, in its ruling, emphasized the importance of consumer protection in electronic transactions. The commission noted the Petitioner's failure to provide concrete evidence of RBI guidelines exempting international transactions from OTP requirements. Citing RBI circulars on limiting customer liability in unauthorized transactions, the NCDRC highlighted the principle of zero liability when a customer reports fraud promptly.

The commission also underscored the burden of proof lying with the bank to establish customer liability in fraudulent transaction cases. It found the Respondent's prompt reporting of the fraud and lack of contributory negligence compelling, dismissing the Petitioner's claims of a valid transaction.

While upholding the District Forum's order, the NCDRC modified the State Commission's ruling regarding the disbursement of the statutory deposit of INR 25,000, stating it should be adjusted against the decretal amount or refunded to the Petitioner if already paid.

This ruling sets a precedent for consumer protection in online financial transactions, reinforcing the importance of banks adhering to RBI guidelines and promptly addressing customer grievances in cases of fraud. It underscores the responsibility of financial institutions to ensure robust security measures and transparent processes in handling electronic transactions.