Online banking has imposed a massive liability shift from banks to customers

Impetus

Section 24 of the Bills of Exchange Act, 1882 effectively makes a bank liable if it pays on a forged cheque. For well over 100 years this has been the legal practice. Along comes online banking, and every bank has imposed its own legal "terms and conditions" on the use of online banking services – which often/usually throw the burden on the shoulders of the account holder.

There is a huge rush within the establishment to get rid of the cheque book. Yet there remains no law specifically designed to define responsibility for misappropriation of customer funds by banks via electronic means.

The US government is even refusing to accept checks for USD 100 million or more* - they presumably want electronic funds transfer instead. Any corporation with a bank account containing anything like 100 million USD in credit, which is enabled for online payments of this scale, is leaving itself wide open to hackers.

Similar issues arise with ATM and debit/credit cards. The burden of proving fraud, and sometimes the liability for same has been shifted to the cardholder’s shoulders.

The government has done nothing to re-assign the burden to the shoulders of the banks, something that would focus their minds on issues of electronic payment security. A retailer can't deny legal liability for the supply of defective goods. Why allow banks the ability to deny liability for defective service provision? One could extend the concept of defective bank service to the abusive lending done by banks during the early 2002 - 2008 era - which was fraud on the taxpayer (and the depositor who is one and the same as the taxpayer), and a threat to the financial security of a country.

* http://www.wrex.com/story/30024907/no-checks-please-irs-no-longer-takes-checks-for-100m

syklops

Could you not just write 2 cheques of 50 million each?

Impetus

syklops wrote: »

Could you not just write 2 cheques of 50 million each?

Of course you can. It seems so stupid. The arrogance of bureaucrats.

The basic point is the risk of having huge sums in a bank account that can be transferred globally, by "cyber criminals". People only look at accounts every so often. By which time multiple transfers can have taken place. When its gone, it is gone. And there is nothing to replace the Bills of Exchange Act provisions in terms of bank customer protection, for eBanking. Meanwhile government agencies work in the background to make the cheque obsolete. Like "stamp duty" charges - which are larger than bank transaction fees, and forcing online interaction with government agencies - where the state has to pay say 2% to the payment card system to accept a card.