Bank Failed To Prove Customer’s Negligence In OTP Fraud: Delhi Consumer Court Orders Rs 70,084 Refund
The consumer commission held the bank guilty of deficiency in service after it failed to reverse fraudulent debits that the account holder had reported the next day, and awarded her a further Rs 25,000 in compensation and litigation costs
Bank must refund Rs 70,084 lost to unauthorised debits reported within a day, consumer commission rules
A consumer commission in Delhi has directed a private bank to refund Rs 70,084 to a woman whose savings account was debited through unauthorised online transactions in July 2016, holding that the customer bears no liability for a third-party breach once she has notified the bank within three working days.
The bench of President Monika Aggarwal Srivastava and Member Ritu Garodia also directed the bank to pay the complainant an additional Rs 25,000 towards compensation and litigation costs.
In its order of October 30, the commission said,"The RBI circular is unequivocal in stating that in cases of third-party breaches, where neither the bank nor the customer is at fault, and if the customer provides intimation within three working days, the liability rests with the bank. In this case, the complainant had duly informed the bank on July 10, 2016, about the unauthorised transactions. The opposite party bank failed to reverse the transaction."
The complainant held a savings account with the bank, which was linked to her mobile number for transaction alerts and one-time passwords (OTPs). Between July 4 and July 9, 2016, unauthorised online transactions totalling Rs 77,114 were debited from the account without her knowledge.
According to the complainant, her mobile phone was facing technical issues during this period, and she did not receive SMS notifications or OTPs in time. When the alerts eventually reached her, she emailed the bank's customer care on July 10, 2016, asked it to block her card and further transactions, and also lodged a police complaint.
She alleged that the unauthorised debits set off a chain of further losses. The bank levied Electronic Clearing Service (ECS) penalty charges on her account, her mutual fund investments failed, and her life insurance policy lapsed. The policy was revived only after she paid penalty charges.
The bank did not refund the amount. A legal notice issued on her behalf went unanswered, after which she approached the consumer commission seeking a refund, compensation and litigation costs.
The bank denied liability for the transfers made to third parties on July 4, July 5 and July 9, 2016. It contended that the leakage of the OTP and the card details was the responsibility of the cardholder.
The commission rested its decision on the Reserve Bank of India's circular dated July 6, 2017. It noted that where the deficiency lies neither with the bank nor with the customer but elsewhere in the system, and the customer notifies the bank within three working days, the customer's liability is nil.
On the facts, the commission found that the complainant had informed the bank on July 10, 2016, a day after the debit of Rs 70,084 on July 9, 2016. The refund ordered corresponds to that transaction.
The commission rejected the bank's attempt to shift the blame for the leaked OTP and card details onto the complainant. Relying on a precedent of the Bombay High Court, it emphasised that in unauthorised electronic transactions, the burden of proving customer liability rests entirely on the bank.
The bank, the commission found, had not established any negligence on the part of the complainant.
Since the bank could not prove any fault on the complainant's part and did not reverse the fraudulent debits despite timely notice, the commission held it guilty of deficiency in service. It accordingly directed the bank to refund Rs 70,084 and to pay a further Rs 25,000 to the complainant towards compensation and litigation costs.
Source: Indian Express