In a notable decision regarding consumer rights, the Banking and Insurance Dispute Resolution Unit, known as “Sindak,” has mandated a local bank to refund an amount deducted from a client’s account through a digital payment service. This ruling was made after the bank failed to provide evidence linking the customer’s phone number to the service or demonstrating that the customer had consented to its use.
Background of the Case
The affected customer, referred to by the initials (B.H.), lodged a complaint against the bank, claiming that his account had been compromised. He asserted that he had not received any notifications pertaining to the deduction from his smartphone.
Investigation Findings
Sindak’s team investigated the complaint and confirmed that the amount was deducted using a digital payment service. However, the bank could not present suitable evidence to establish that the customer’s phone was associated with this service or that the customer had authorized its use. Consequently, Sindak deemed the transaction unauthorized.
Legal Framework and Consumer Protection
As per Sindak’s findings, the bank was obliged to return the deducted amount, relying on regulations set forth for combating fraud and protecting financial consumers, which require institutions to prove authorization in electronic transactions. The unit’s disclosures did not specify the name of the bank involved, the amount refunded, or the exact nature of the digital payment service used, nor did it detail whether a one-time verification code was employed or the number of transactions conducted on the account.
Consumer Rights Under UAE Regulations
The Central Bank of the UAE has established consumer protection standards which stipulate that a transaction can be considered authorized if the financial institution has followed appropriate and secure verification procedures, unless the consumer presents credible preliminary evidence suggesting that they did not carry out the disputed transaction.
Furthermore, these standards require financial institutions to provide round-the-clock digital and telephone channels for reporting the loss or theft of accounts or cards, as well as for reporting any misuse. They must take necessary actions to prevent further unauthorized transactions.
Moreover, financial institutions are obligated to refund unauthorized payments to the consumer upon completion of the investigation, or within 30 calendar days from the date the consumer reports the issue or when the institution becomes aware of it, whichever is shorter. This is except in cases where evidence suggests consumer fraud or gross negligence.
Complaint Resolution Protocols
If a financial institution is unable to conclusively confirm a client’s authorization of a transaction and there remains a dispute regarding responsibility or evidence quality, the complaint must be directed to a formal complaint resolution mechanism.
About Sindak
Sindak is an independent body established by the Central Bank of the UAE to address disputes between consumers and licensed financial institutions or insurance companies. Its remit includes complaints related to bank accounts, credit cards, payment services, loans, and insurance disputes.