Study On The Civil Liability In Forged Bank Card Fraudulent Disputes

In recent years, the bank card business has grown rapidly in China. The bank card has become a necessity in people’s lives. It offers great convenience for residents. In the meantime, the bank card security risks implied are unfolding incrementally and crimes concerning bank cards show an increasing trend. The judicial dispute on the bank card stolen funds between the cardholder and the bank has become a relatively common one. At present, such disputes do not clearly defined in the contract law and other relevant laws and regulations, lacking of relative standards and codes. As a result, different counts have different asserting on the legal liability of the disputes that stealing occurs in account funds of banking. Sometimes the banks win the lawsuit, sometimes the cardholders win, sometimes all of the cardholder and the bank has to assume responsibility for loss. This article analyzes and explores who shoulder the civil liability among the subjects in different circumstances by summarizing typical practice about forged bank card fraudulent.According to the facts, forged bank card fraudulent case can be divided into three categories. The first category is that the third party uses the bank self-service equipment management loopholes to steal the card number and password. Then, they counterfeit bank cards and steal funds illegally. The second one is that the cardholder leaks bank card number and password accidentally. The third party counterfeits bank cards and steals funds. The third category is that the bank card number and password disclosure unknown reasons, in the case of real bank cards still held by the cardholder, the bank card funds in the account by the third party use of counterfeit cards stolen. The courts have different ideas and the referee standards in each type of cases. Overall, the focuses of controversy in the trial practice about such cases include choice of applicable law, the confirmation of defaults between the parties and the allocation of burden of proof.Studying fraudulent bank card disputes, the prerequisite is to clarify the legal relationship among the bank card-related subjects. According to different types of case facts, forged bank card fraudulent disputes are mainly related to the issuing banks, the cardholders, the special merchants and the acquirers. Cardholders and issuing banks establish the recipients savings contractual relationship by signing bank card recipients. Because there are no regulations about for such contracts in the contract law, it is a nameless contract. However, according to a variety of bank card services and the features of rights and obligations between the contracting parties, the nature of such contract can be thought of as a mixture of deposit legal relationship, legal relationship of entrusted settlement and consumer lending legal relationship. There is no direct contractual relationship between the issuing banks and the acquiring institutions, but they all abide by the settlement regulations and industry standards established by the central bank or bankcard association. The legal relationship between issuing banks and special merchants is built mainly in the POS transaction mode. If the merchants’ issuing bank is the same as the issuing bank, they can form the principal-agent relationship through accept the bank card business agreement. If the merchants’ issuing bank is not the issuing bank, there is no direct legal relationship between the issuing bank and merchants. They are coupled together by acquirers, both of them are related with the acquirers. Therefore, the rights and obligations between the parties are mainly from the convention between acquirers and merchants. General contract relationship for merchandise and service forms between cardholders and merchants, but the payment is commuted for cards rather than cash. There is no direct legal relationship between cardholders and acquirers in principle. But in the cross-bank ATM transactions, the acquirers as ATM machine operators are responsible for the obligation to protect the security of trading environment.After clarifying the legal relationship among the bank card-related subjects, we can confirm the subject bearing civil liability in forged bank card fraudulent disputes. From the actual litigation cases, the cardholder would claim for damages from the bank. Some people may also regard special merchants and acquirers as defendant. Generally, forged bank card fraudulent disputes are based on the presence savings contract relationship between the issuing bank and cardholder. Though acquirers and merchants are closely related to these cases, they are not the parties concerned to the contract. Therefore, in accordance with the principle of the Privity of Contract, special merchants and acquirers should not be accused in a default lawsuit brought by the cardholder without liability for breach contract. Thus, the subject of liability in forged bank card fraudulent disputes is generally the issuing bank, special merchants and acquirers are not the subjects. The premise in judging whether the issuing banks are liable is to confirm if they fulfill their obligations to the cardholder. The obligations stem from the provisions of the contract or law, including paying the principal and interest according to the requirements of the cardholders, providing safe and secure trading environment for cardholders, keeping the cardholder’ s bank card information and passwords secret. If the issuing bank fails to perform or improper perform the above obligations, it shall bear the liability for breach of contract. In fraudulent bank card disputes, the issuing banks’ defaults are mainly in three aspects: the first is lack of management of bank self-service equipment, resulting in disclosure of the cardholders’ bank card number and password, the second is failing to fulfill their obligations to audit the pseudo card transaction, the third is refusing to honor cardholders’ deposits and principal after the payment to the third party. According to the contract law, if the cardholders have their faults in bank card forgery and fraudulent, it may reduce or waive the bank’ s responsibility. Such situations generally include disclosing your password to others; lending, authorizing others to use your bank card; not carefully protecting by others peeping when you use the password; believing fraud telephone or message causes the leakage of password; when funds become abnormal decrease in bank card account, failing to report or report the loss timely when finding the funds decrease abnormally.There are three different options in the court about the application of the legal constitution, including tort theory, breach of contract theory and the matter concerning a claim for the liquidation to the third party who has no acceptance authority. There are important differences in the burden of proof, the rights and obligations among different legal constitution and application. Selecting tort theory is based primarily on the "Tort Liability Law," Article 37. The bank shall be responsible for the security obligation, take the necessary security measures to guarantee safe and reliable moving for facilities, safeguard the personal and property security of cardholders using the devices for self-service dealings in that place. If the banks’ poor management led to the cardholder password disclosure and the third party’s forgery and theft, bank shall constitute the cardholder nonfeasance infringement. Selecting breach of contract theory is based primarily on relationship of bank card contract between the parties. Although the funds reduction in the cardholder’ s bank account results from the third party’s forgery and theft, the bank as a deposit safekeeping party fail to perform the obligations, reviewing the bank card carefully and ensuring the safety of the cardholder account. Therefore, they shall be liable to the cardholder for breach of contract. The matter concerning a claim for the liquidation to the third party who has no acceptance authority is mainly determined by based on behavior effect of bank’s payment to third parties. If bank’s payment to third parties doesn’t have any legal effect about liquidation of the debt, the debtor-creditor relationship between the cardholder and the bank still exists. If the bank’s payment to third parties forms a repayment to the quasi-possessor of creditor’s rights, the credit and debt between bank and the cardholder eliminates. The effect of the matter concerning a claim for the liquidation to the third party who has no acceptance authority is the responsibility of all or nothing, the cardholder or the bank bearing all the losses. By comparing three different options, we can conclude that breach of contract theory can protect the cardholders’ interest better, the application of tort theory will have some disadvantage to cardholders. the legal effect of the matter concerning a claim for the liquidation to the third party who has no acceptance authority could not easily be accepted by litigants.When the facts are in the state that whether they are true or false is not clear, the distribution of the burden of proof has great influence on the interests of the parties. If the proof given by the side assuming the burden of proof doesn’t reach the standard, it will bear the consequences of failure on burden of proof, faced with the risk of losing. The difficulty of forged bank card fraudulent disputes is that both of issuing bank and the cardholder have difficulty to present evidence of third party’ s forgery and theft. For the cardholders, it can only prove that there is a deposit contract relationship between they and the issuing bank, and the real bank card is still in their hands. For issuing banks, it is difficult to fully prove whether third party’s card is a true card, limited information and technique. Therefore, the distribution of burden of proof is dropped into in a dilemma. There is also a dilemma about distribution of the burden of proof for the disclosure of bank card information or transaction password. The cardholder and the issuing bank are difficult to obtain evidence of the other party’s intention or negligence. In addition, even if the two sides can provide some evidence, they may have no enough evidence to prove that the other side has fault on transaction password leakage.The current law has not regulated the distribution of the burden of proof in forged bank card fraudulent disputes. If adjudicating in accordance with the general principles of the distribution of the burden of proof in the Civil Procedure Law, it does not enable the cardholder and the issuing bank to resolve their disputes appropriately. Because the distribution of burden of proof is essentially a distribution of interests between litigants, interest balance theory can be introduced to solve such problem. According to the principle of fairness and the purpose of legislation, distribution of burden of proof can be decided by the distance between parties and evidence, the degree of difficulty in the proof of evidence, the probability fact existence etc. Therefore, from the point of view of interest balance theory, the issuing bank shall bear the burden of proof on whether or not the third party has forged the fraudulent bank card in cases of forged bank card fraudulent disputes. Meanwhile, the cardholder shall bear the burden of proof on whether or not to keep the bank card information or password in confidential.