Liability on Unauthorised Credit Card Charges

After a day of intense retail therapy, you suddenly realise that you had left your credit card in one of the shops at the mall several hours ago. You experience heart palpitations at the thought of being charged astronomical sums for unauthorised or fraudulent transactions. What should you do?

The answer is simple. Report the loss of your credit card to your credit card issuer without any delay.

Clause 15.2 of Bank Negara’s Credit Card Guidelines (BNM/RH/GL-041-01)(the “Guidelines”) provides that the cardholder’s maximum liability for unauthorised transactions as a consequence of a lost or stolen credit card shall be limited to the specified by the issuer of credit cards, which shall not exceed RM250, provided the cardholder has not acted fraudulently or has not failed to inform the issuer of credit cards as soon as reasonably practicable after having found that his credit card is lost or stolen.

The efficacy of Clause 15.2 was tested in Diana Chee Vun Hsai v Citibank Berhad [2009] 6 CLJ 774. In this case, the cardholder reported the loss of her credit card to the issuer of her credit card on the day that she discovered its loss. The card issuer claimed a sum of RM1,859.01 from the cardholder as unauthorised charges incurred on her credit card. The card issuer relied on a provision in the credit card agreement which stated that the RM250 limit only applied to transactions effected within one hour prior to the reporting of the loss of the credit card.

The High Court ruled in favour of the cardholder and held that the Guidelines are subsidiary legislation and have the force of law. The Court also found that the credit card agreement must be construed in accordance with the Payment Systems Act 2003 and the card issuer could not circumvent the Guidelines in order to limit its liability. Accordingly, the Court held that the provision in the credit card agreement relied on by the card issuer to limit the application of the RM250 liability was “unreasonable, ridiculous and contrary to Clause 15.2 of the Guidelines”. The Court also held that the onus lay on the card issuer to prove that there had been unreasonable delay by the cardholder to report the loss of the card and that it had failed to produce any evidence to discharge this burden.

Hence, if you report the loss without delay, like Ms Chee did, you should be able to limit your loss to RM250 if the unauthorised charges exceed that amount.

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