Violation of the obligation to check account statements cannot lead to forfeiture of the right to have the bank balance restored by the bank

Introduction

We all deal with payment transactions on an almost daily basis, without giving it much thought. Nevertheless, the Supreme Court of the Netherlands (Supreme Court) rendered a judgment on this topic on 21  May 2021.

In the Netherlands, the payment transaction is regulated in Title 7B of Book 7 of the Dutch Civil Code (DCC). This legislation has an European origin and is the result of the implementation of Directive 2007/64/EC (Payment Service Directive I (PSD1)), which came into force on 1 November 2009, and Directive (EU) 2015/2366 (Payment Services Directive II (PSD2)), which came into force on 19 February 2019 and has replaced PSD1, as a result of which some provisions in Title 7B of Book 7 of the DCC have been amended. The judgment of the Supreme Court is still based on the legal framework as it applied prior to the implementation of  PSD2, but the judgment remains relevant under current legislation.

This newsletter summarizes the main considerations of the Supreme Court in the aforementioned ruling in the context of unauthorized payment transactions.

Considerations of the Supreme Court

The recent judgment of the Supreme Court concerns a case in which the bank has executed a payment transaction from the payment account of an account holder, while the account holder claims that he has not given permission for the transaction. The account holder argues that this is an unauthorised payment transaction within the meaning of section 7:522 of the DCC and that the bank is therefore liable for the damages he has suffered. Pursuant to section 7:528 of the DCC, the bank is, in principle, obliged to immediately repay the amount of the unauthorised payment transaction to the account holder. However, the bank argues that it is not obliged to do so because (in short) the account holder has been grossly negligent by failing to comply with one or more of his obligations pursuant to section 7:524 of the DCC, including the obligation to inform the bank immediately of the unauthorised use of the account of the account holder. Pursuant to section 7:529 of the DCC, the account holder is, in that case, not entitled to rectification of the amount involved in the unauthorised payment transaction. In this respect it is relevant that in the applicable terms and conditions it was agreed that there is gross negligence on the part of the account holder within the meaning of section 7:529 of the DCC if the account holder fails to check his bank statements immediately upon receipt.

The Supreme Court considered first of all that the fact that the bank has carried out the transactions in accordance with the form and procedure agreed between the account holder and the bank and the bank has authenticated the payment transactions (by, among other things, comparing the signatures on the transfer and acceptance documents with the account holder's signature in its possession) does not preclude the existence of an unauthorised payment transaction.

With regard to the bank's defence that it is not obliged to make rectifications because (in short) the account holder has been grossly negligent in fulfilling his obligations pursuant to section 7:524 of the DCC by failing to inform the bank immediately without delay of the unauthorised use of the account holder's account, the Supreme Court has indicated the moment from which 'immediate' notification must be given. With reference to PSD1, the Supreme Court concludes that this means that the account holder must notify the bank from the moment he has subjective knowledge of the unauthorised payment transaction. The account holder must therefore have actual knowledge of the unauthorised payment transaction and the 'immediate' timeframe does not start right at the moment in which the account holder could have known about the unauthorised payment transaction.

The Supreme Court has also indicated that, again with reference to the PSD1, that the same applies to section 7:526 of the DCC. This section provides that the account holder who is aware of an unauthorised transaction only has a right to rectification if the account holder notifies the bank of the transaction concerned without delay and no later than thirteen months after the value date on which his account was debited.

Finally, it is also relevant that the Supreme Court has given further clarification on the possibility of agreeing on a contractual arrangement such as the one laid down in the applicable conditions. The Supreme Court considered that pursuant to section 7:550 of the DCC it is not possible to deviate from the statutory regulation to the extent that this is detrimental to the account holder who is a consumer. As the contractual arrangement would result in the account holder losing his right of rectification in the event the account holder does not immediately notify the bank at the moment he has received the bank statements (at which moment the account holder did not yet have subjective knowledge) and, if the account holder indeed fails to immediately notify the bank, in the account holder acting grossly negligent within in the meaning of section 7:529 of the DCC, the contractual arrangement is indeed detrimental to the account in comparison to the statutory regulation and should therefore not apply.

Conclusion

With this judgment the Supreme Court has provided clarity to market parties on various points. It shows that consumers are extensively protected even when contractual arrangements deviate from the law. Payment service providers should be aware of this and, if necessary, adjust the applicable conditions accordingly. If you are such a party and you have questions about the implications of the above judgment, please do not hesitate to contact Ploum's banking & finance specialists.