The European Court of Justice (ECJ) in Luxembourg ruled on Wednesday that banks are liable for payments made with contactless payment cards after a customer has reported a card missing.

The issue was referred to the ECJ by Austria's Supreme Court, which sought clarification in the case of the Turkish DenizBank versus the Austrian consumer protection organization VKI.

DenizBank had claimed it could not be held responsible for small-euro amount payments of up to €75 ($88) made on lost or stolen cards outfitted with so-called Near Field Communication (NFC) technology. The bank said it was unable to stop them.

The VKI challenged that claim and said the bank's practices were unfair to consumers. Businesses across the EU are exempted from requiring PIN verification of payments up to €50.

Exceptions cannot be based on false claims

DenizBank contracts place sole responsibility for lost cards and any payments made thereon with the consumer.

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The ECJ found that a bank has the right to agree to contractual exceptions to EU guidelines with customers regarding NFC cards — which the court says are a type of anonymized payment instruments. However, such exceptions cannot be founded on untrue claims.

The court found the bank's claim that it is impossible to block payment with a lost or stolen card was simply untrue, adding that the bank is responsible for proving that impossibility before contractual exceptions can be justified.

The ECJ said customers should be allowed to immediately report a lost or stolen card or any other misuse of the chip at no cost to the consumer —unless it can be proven that the customer him or herself is involved in some type of criminal activity with said card.

Cashing out in the age of the coronavirus

Cards and smartphones equipped with NFC technology have become extremely popular, especially during the coronavirus pandemic where most businesses and customers prefer contactless payment to exchanging cash.

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The technology has been proven safe and effective as the transmission of data is extremely limited in its physical range and is re-encrypted with each transaction — making it much safer to use than Bluetooth, for instance.

Those nevertheless worried about criminals somehow stealing information off NFC cards are advised to either keep them in a wallet with other NFC-equipped cards (these cancel one another out) or store them in a protective sleeve when not in use.

js/msh (AFP, dpa)