Unauthorised Electronic Banking Transaction- Loss To Consumer Or The Bank?

This year, the Financial Literacy Week by RBI focuses on “Consumer Rights” to educate consumers on their liability for unauthorised electronic banking transaction.

Can you imagine the possibilities of electronic banking transactions? Having the ability to receive or send money whenever and wherever. Buying things online in the quickest way. Or getting your bank related work done in minutes if not seconds. Well yes, it’s all that and more. Electronic banking has given consumers convenience like never before. Saving time and energy of physically getting things done are diminishing by each passing day. But with all that power, also comes a great deal of caution and responsibility.

Do you remember the times you have received a message saying- ‘Do not share your user ID and password with anyone’? Is it safe to say more than once? Definitely. So, what is a banking fraud and how is electronic transaction susceptible to such a cause quite easily sometimes? Let’s say that you got an email from your bank asking for your details for xyz type of update and you enter the site only to realise there is something odd. Or you put in your details on some random site without genuine or easily recognisable credentials? Or the very common act of responding to Spam messages that claim to send you 10 million dollars because someone is really ‘generous’? And most recently, where sites have actually been known to sell your data that you entered trusting that one and only social website?

Fraudulent acts of banking can come from anywhere and anytime. A known term for this is called ‘phishing’ where an organisation or an individual tries to illegally obtain your personal information to do just about anything. So, how do you deal with it? Earlier, a commonly known fact was bearing the loss. Why? Is it because you didn’t know whom to ask for help? What to tell the bank if they question you for sharing details to a third party website? Or you just didn’t get notification soon enough to realise the urgency of notifying an authority? Can be one and can be all.

With the day-by-day shift to digitisation, which acts as a boon to advancing technology meant to simplify processes as well as optimise security; it also brings a need to educate people on safe practices and awareness in case of being victimised by a fraudulent act. Considering the surge on consumer grievances relating to unauthorised transaction resulting in debits to their account / cards, the criteria for determining customer liability in these circumstances have also been reviewed. All said and done, you may now understand your power as a consumer, thanks to RBI’s law on safeguarding consumer rights and their money.

According to the law, RBI makes it clear that the consumer has no liability when an unauthorised transaction happens in case of a fraud or even contributory negligence and/or deficiency on part of the bank. But what if neither the consumer nor bank is at fault? The law says that the consumer will not bear the loss if he/she notifies the bank within 3 days of the fraudulent occurrence. In this case, the bank shall be liable to pay the consumer full amount within 10 days of time.

However, in cases where the fraud is due to consumer’s negligence by sharing payment credentials then the loss till the time he/she reports to the bank shall be borne by the consumer only. Now, here’s a catch! What if the consumer is not!at fault and the bank blames them for sharing their information with a third party that inherently led to an unauthorised transaction? The bank will play dumb to admit their leniency in the matter or even admitting a third-party breach. Fret not, the law by RBI as dated July 2017 clearly states, ‘the burden of proving customer liability in cases of unauthorised electronic banking transactions shall lie on the bank’.

In other words, the bank has to do all the hard part to prove their innocence in the matter and your complete fault. Sounds easy? It is not. The RBI further emphasizes the need for banks’ attention to not only send immediately and without fail, SMS and e-mail alerts, but also ensure that such messages are enabled to carry the customer’s reply too so that a consumer can report any such fraud immediately.

So, to sum it up- as consumers, know your rights and don’t ever share your personal and banking information with other people for your own security. Now that you know, share this blog and let’s unite with RBI to spread the importance of being financially-sound this Financial Literacy Week 2018.

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