Protection and Liability in Case Of Fraudulent Electronic Transactions

The digital transactions in the country crossed the 1 billion mark this December 2017 as per RBI data. Digital transactions include transactions done using credit cards, debit cards, Internet banking, mobile banking, UPI, prepaid instruments and unstructured supplementary services. It is convenient to transact digitally as transactions can be tracked and people need not carry too much cash in hand. But there is a new menace that is growing at a fast pace which is the fraudulent use of credit cards and debit cards and online fraud. Many people have been victims of such attacks. For example, some people get a message late in the night that their card has been used in a faraway place in China or U.S. In other cases, purchases are made in the names of credit card holders who are registered users of online shopping portals. How can you protect yourself from digital fraud? What can you do in case there are fraudulent transactions in your account?

Preventive Measures

• Use your debit and credit cards only in trusted shops and online portals. Check your bank account statement and credit card statement regularly and report unauthorised transactions immediately to the bank.
• Destroy old cards or cards that you do not use.
• Ensure that you get alerts on monetary transactions made using your cards.
• Ensure that the bank has your correct contact details so that they can inform on suspicious activities
• Use websites and payment methods that have multiple security layers like SSL, device confirmation, ID checks and transaction limits
• Do not store user credentials online and do not write them down somewhere.

What Happens When Fraudulent Transactions Occur

•  A customer will have a zero liability if the loss is due to negligence of bank even if the customer does not report the fraudulent transaction.
• If the loss is due to negligence or mistake on your part, then you will have to bear the loss. Suppose you disclose the OTP or card details like CVV to someone, you will be liable for the loss. It is important to notify the bank about the transaction so that they can block the card and prevent further losses. You should also file a complaint at the nearest police station.
• If the fraud is caused by a third party and neither you nor the bank is responsible for the unauthorised transactions there are two possibilities -

You notify the bank within 3 days of the unauthorized transaction -

Then your liability is zero. The bank will have to credit the amount within 10 working days from the date of notification.

You report the fraudulent transaction within 4 to 7 days of its occurrence -

Then you are liable to an amount that is limited to the lower of the transaction value or the amount mentioned by the RBI as per the table below for different modes of transaction -

• Rs 5,000 for Basic Savings Bank Deposits (BSBD)
• Rs. 10,000 for current accounts/ cash credit/ overdraft accounts of individuals with annual average balance (during 365 days preceding the incidence of fraud)/ limit up to Rs. 25,00,000 and credit cards with limit up to Rs 5,00,000, ,pre-paid payment instruments, gift cards and for current/ cash credit/ overdraft accounts of MSMEs.
• Rs. 25,000 for all other current/ cash credit/ overdraft accounts and credit cards with limit above Rs 5 lakh.

Banks must ensure the following -

• Banks must provide customers with 24×7 access via different modes of communication.
• Acknowledge the reporting of the fraudulent transaction.
• The burden of proof of customer liability in case of unauthorised electronic banking transactions is with the bank.

Your Responsibilities

• Provide all details of communication such as address, mobile number to the bank.
• Do not indulge in negligent activities like sharing of CVV number or passwords, OTPs with others
• Do not download suspicious apps and games
• Keep your cards and online credentials safe and secure
• Contact the banking ombudsman if you are not satisfied with the bank’s resolution
• Update anti-virus software and other softwares that you use regularly so that your computer and mobile phones are protected.