Debit card blocked without notice? Consumer court orders ₹1.25 lakh compensation, says banks must inform customers

Imagine landing at an international airport with enough money in your bank account but being unable to buy food, withdraw cash or even access an airport lounge because your debit card has been blocked without your knowledge.

That is what happened to a Federal Bank customer, prompting the Ernakulam District Consumer Disputes Redressal Commission in Kerala to order the bank to pay ₹1.25 lakh in compensation and litigation costs. The commission held that although banks can block cards to prevent fraud, failing to inform customers beforehand amounts to deficiency in service, TOI reported.

What happened in the case?

According to The Times of India, the customer had maintained an account with Federal Bank since 2015 and was using an international debit card while travelling from Kuwait to Kochi in September 2021.

According to the consumer commission’s order, the card failed when he tried to access an airport lounge at Kuwait International Airport. Further attempts to use the card at airport shops were also declined.

Since he had relied on the card for expenses during the trip, he and his family were unable to purchase even food and drinking water at the airport. The problem continued after they landed in Kochi, where the card failed at a duty-free shop and an ATM as well.

The customer later approached the consumer commission, alleging that the bank had blocked his debit card without any prior notice.

Why did the bank block the card?

Federal Bank told the commission that it had received an alert from Mastercard about a possible data compromise involving the customer’s card. As a precaution, it blocked the card and issued a replacement.

The bank also said it had attempted to inform the customer through an SMS, but the message could not be delivered because of a technical issue.

The commission, however, found the explanation unconvincing. It noted inconsistencies in the bank’s records regarding when the Mastercard alert was received and when the replacement card was issued. It also observed that while the customer remained stranded abroad, the replacement card was still lying at the bank branch.

What did the consumer court order?

The commission observed that while protecting customers from fraud is a legitimate objective, banks must also ensure that customers are informed before disabling access to their funds, the report said.

Holding Federal Bank guilty of deficiency in service and unfair trade practice, it directed the bank to:

• Pay ₹1 lakh as compensation for the mental agony, hardship and trauma suffered by the customer and his family.
• Pay ₹25,000 towards litigation costs.
• Make the payment within 45 days, failing which the amount will carry 9% annual interest until payment.

The order serves as a reminder that while banks can take preventive action against potential fraud, they are expected to communicate such actions effectively so customers are not left without access to their own money, particularly while travelling overseas.