The CJEU ruled banks must refund unauthorized transactions immediately, even if clients are suspected of negligence, reshaping fraud liability rules.
CJEU mandates immediate refunds for unauthorized transactions
The Court of Justice of the European Union (CJEU) ruled on October 15 that banks must refund unauthorized transactions immediately, even if there is a suspicion of serious negligence by the client. This decision applies to situations where a customer's account is compromised without their knowledge or consent.Legal basis for the ruling
The ruling interprets two articles from the second payment services directive (DSP2), which outline the responsibilities of banks and clients in unauthorized payment cases. Article 73 requires payment service providers to refund unauthorized transactions immediately, and at the latest by the end of the first business day after becoming aware of the transaction, unless they have "good reasons" to suspect fraud by the victim.Clarification on client negligence
The CJEU clarified that a suspicion of serious negligence by the victim does not exempt the bank from its obligation to refund immediately. The ruling outlines a two-stage process: at the time of reporting fraud, the bank must refund without delay unless it can prove the client intentionally committed fraud.Current refund practices and trends
Currently, banks and other payment providers do not refund all unauthorized payments. According to the 2024 report by the Payment Security Observatory, only 62% of unauthorized payment amounts are refunded, leaving 38% of the burden on victims. The Bank of France has observed a decline in refund rates over the last two years, attributing this to better assessment of client negligence by institutions.Legal reactions and implications
Legal professionals have reacted to the CJEU ruling with varied perspectives. Some believe it may not drastically change banking practices in the short term, while others see it as a significant shift in favor of victims. Banking lawyer Me Mikaël Le Bot suggests the ruling could offer victims a new strategy to obtain refunds more quickly, though only in cases where the fraudulent nature of the payment is not contested.
