Banks Ought To Reverse Unauthorized Transactions If Informed Within 3 Days, Chandigarh District Commission Holds Standard Chartered Bank Liable

Brief Facts:

Mr. Prem Kumar Jindal (“Complainant”) was a holder of an SCB Titanium Credit Card issued by Standard Chartered Bank (“Bank”), with no history of default. One morning, the Complainant received an SMS from the bank indicating OTPs for seven unauthorized transactions totalling Rs. 2,60,000/- on his credit card at Amazon Pay. The transactions involved the unauthorized purchase of Amazon Pay Gift cards issued by Qwikcilver Solutions Private Limited. The Complainant claimed he did not receive any prior alerts from the bank regarding the exceeding credit limit. The Complainant promptly notified the bank, resulting in the blocking of his credit card and the initial reversal of the debited amount. However, the amount was later reversed and debited again from his card account. The Complainant filed a police complaint, requested details of the fake transactions, and insisted that having reported the unauthorized transactions within three working days, he has zero liability. Feeling aggrieved, the Complainant approached District Consumer Disputes Redressal Commission-II, U.T. Chandigarh (“District Commission”) and filed a consumer complaint against the bank, Amazon Pay and Qwikcilver.

In response, the bank argued that the OTPs were sent in line with transaction initiation. The bank explained that the disputed transactions were processed on 24.06.2019, with the time captured in GMT format and the OTP and SMS log details in IST format. The bank blocked the Complainant's credit card for security reasons and issued a replacement card following the dispute. The investigation revealed the transactions as Online Secured Transactions, requiring both credit card details and OTP for validation. It argued that it was the responsibility of the cardholder to keep card details confidential until loss reporting.

Amazon contended that the Complainant's account was secured with a password known exclusively to him. The Company stated that it cannot verify unauthorized transactions and directed the Complainant to approach the bank for resolution. It emphasized that its role was limited to an e-commerce platform facilitating transactions between users and third-party sellers.

Qwikcilver acknowledged the issuance of Amazon Gift Cards but claimed no involvement beyond subjecting it to Amazon's approval upon payment. It argued that no case was made against it and requested for dismissal of the complaint against it.

Observations by the District Commission:

The District Commission referred to the Reserve Bank of India's 'Circular No.RBI/2017-18/15 DBR. No. Leg. BC.78/09.07.005/ 2017-18', dated 06/07/2017, titled "Customer Protection-limiting Liability of Customers in Unauthorized Electronic Banking Transactions." The circular outlines the conditions under which a customer is entitled to zero liability, including contributory fraud or negligence on the part of the bank or a third-party breach, provided the customer reports the unauthorized transaction promptly.

The District Commission held that the bank failed to comply with the directions issued by the Reserve Bank of India upon the Complainant's immediate intimation of unauthorized transactions on the same day. The circular places the burden of proving customer liability in such cases on the bank. It held that the bank didn't produce valid documentary evidence to substantiate the Complainant's negligence. Therefore, the District Commission held the bank liable for deficiency in services.

Consequently, the District Commission directed the bank to pay the Complainant Rs. 2,60,000/-, the amount debited due to unauthorized transactions, along with interest at a rate of 9% per annum from the date of deduction (26.06.2019) until the actual realization.

The District Commission dismissed the complaint against Amazon and Qwikcilver