Financial regulators should clearly state that banks will compensate customers who were defrauded of their deposits through the use of forged bank cards, provided serious negligence was not involved, a Financial Services Agency panel said in an interim report Thursday.
The paper is the latest in a series of moves to review the compensation framework amid a surge in bank card forgeries. Critics have said the rules are too vague and leave room to allow financial institutions to refuse to pay damages for swindled deposits.
In its report, the FSA panel says the burden of proving that the depositor was negligent should rest with the bank. It also outlines specific examples of what might constitute “serious negligence.”
The examples include “acting with intent,” “giving a personal identification number to another person” and “having the identification number written on the face of the card.”
The panel did not reach a conclusion on how to deal with cases of card fraud in which the ID number was easily guessed, including a birthday or part of the depositor’s phone number.
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