Chip and PIN - Banks' Liability

Banks' Liability

Until 1 November 2009 banks' legal liability in cases of unauthorised use of card accounts was subject to terms of the voluntary Banking Code, and in many cases banks refused to reimburse cardholders who reported unauthorised card use, claiming that their systems could not fail and consequently the cardholder must have acted "without reasonable care"—the Code states that unless a bank can prove that its customer acted fraudulently or without reasonable care, the most that the customer will be liable for is £50.

The Financial Services Authority (FSA) Payment Services Regulations 2009 came into force on 1 November 2009 and shifted the onus onto the banks to prove, rather than assume, that the cardholder is at fault. The Financial Services Authority said "It is for the bank, building society or credit card company to show that the transaction was made by you, and there was no breakdown in procedures or technical difficulty" before refusing liability.