Vittoria Clavello

Pavia e Ansaldo Studio Legale, Milan

vittoria.clavello@pavia-ansaldo.it

Mario Ciccone

Pavia e Ansaldo Studio Legale, Milan

mario.ciccone@pavia-ansaldo.it

In its recent decision, No 10118 of 4 July 2022, the Banking and Financial Arbitrator (Arbitro Bancario Finanziario or ABF) ruled on a dispute concerning the fraudulent use of a stolen credit card. Specifically, the cardholder complained about the improper use of the card and demanded that both the placing bank and the card-issuing intermediary be ordered jointly and severally to repay the amount taken from him through five unauthorised transactions.

In short, after parking his car near the city train station, the plaintiff left his bag in the vehicle. His wallet, left unattended for only a few minutes, was stolen shortly thereafter. Among the plaintiff’s personal belongings, there was also his credit card, which was used several times by unknown criminals in the hours immediately following the theft.

After reporting the theft to the police, the plaintiff filed a complaint against both the intermediary that issued the credit card and his own bank in order to obtain a refund. In fact, his card had not been issued directly by his bank (where he had opened his bank account), but by another and different intermediary. Both intermediaries rejected the plaintiff’s claims. The card issuer refused to refund any money stolen alleging that the plaintiff engaged in ‘grossly negligent’ conduct, while the placing bank argued that it lacked locus standi, pointing out its role as a mere placement agent for the credit card and highlighting that the issuer should be held responsible for authorising the transactions.

Consequently, the plaintiff decided to refer the dispute to the ABF. The parties filed their defensive briefs and the designated panel ruled on the matter as follows.

On the lack of locus standi raised by the placing bank

The ABF examined the relevant contractual documentation and noted that the contract in force between the cardholder, issuing intermediary and placing bank provided that the party entitled to handle all matters relating to the use of the credit card (eg, authorisation, accounting and reimbursement of payment transactions) was the issuing intermediary. The placing bank’s function, on the other hand, was limited to the mere distribution of the card to its customers. Therefore, the ABF upheld the argument of lack of locus standi raised by the placing bank.

On the merits of the dispute: the issuer’s liability

According to the ABF, the issuing intermediary had failed to prove the proper registration, authentication and accounting of the disputed transactions (as prescribed by Article 10, Legislative Decree No 11 of 2010, as amended by Legislative Decree No 218 of 2017). In fact, the fraudulent transactions appeared to have been authorised without the prior entry of the PIN code (in breach of both European Union Delegated Regulation No 2018 of 389 and the Opinion of the European Banking Authority on the elements of strong customer authentication under the revised Payment Services Directive).

Moreover, the transactions at issue were not blocked by the issuer, even though their anomalies should have raised suspicions of fraud (ie, use of the same credit card at the same point of sale for three or more times within a period of only 24 hours; see Article 8(2)(a), Ministerial Decree No 112 of 2007). For these reasons, the ABF ordered (only) the issuing intermediary to fully refund the plaintiff.

Therefore, if you are the victim of a credit card theft, pay close attention to your contractual documentation so that you can direct your claim to the right subject.