Legislative proposal regarding the fraudulent use of credit cards

The Ministry of Justice has presented its proposal for new Commercial Code, which aims to bring together all the commercial regulations currently contained in several separate legislations.

One of the main innovations of the new Commercial Code is its regulation of credit cards. According to the proposal, banks have an obligation to contact cardholders immediately when costs charged to their credit cards stray from the habitual pattern of transactions made with the card. Those transactions could be an indication that the card in question has been stolen or is being used fraudulently.

If the bank does not comply with this obligation (i.e. it fails to warn its customers when amounts paid with a credit card exceed that credit card's habitual transaction amounts) the bank will bear the cost incurred from the fraudulent use of the credit card.

In addition, the proposed new Commercial Code includes several provisions in the event of theft or loss. According to the proposal, when a customer has informed the bank of the loss or theft of a credit card, the customer will not subsequently bear the consequences arising from the fraudulent use of the stolen or lost credit card.

Finally, the proposal also envisages placing an obligation on financial entities to send cardholders a statement of the transactions made in the last month, with those cardholders then having one month of receipt of the statement within which to challenge those transactions.

This proposal has yet to be studied by the Spanish Government, which is likely to prepare a final draft by late 2013.