The examination showed that when a customer cancels a credit card, transactions received on that card after the cancellation are blocked, as required. However, there are certain circumstances where the card continues to be charged despite its cancellation by the customer.
Therefore, the Banking Supervision Department has required CAL to correct the
deficiency and to prevent a recurrence of such cases.
The Banking Supervision Department’s position, which was transmitted to CAL, is that under the circumstances, the company was not permitted to allow the recording of transactions in its customers’ accounts. The company’s action is contrary to Section 11(a) of Proper Conduct of Banking Business Directive 470 on “Debit Cards”, which sets out that “An issuer shall not debit a customer’s account for transactions made after the termination of the debit-card contract…”.
Under circumstances in which a card is cancelled, the company does not need to assume what the customer’s desires are in connection with charging the cancelled card. Insofar as the company is interested in providing service to the customer after the contract between them has been cancelled, the company should formally renew the contract after ensuring the identity of the cardholder and obtaining the cardholder’s consent, including regarding the collection of fees. Charging customers under these circumstances contravenes the Banking Supervision Department’s directives.
Since the Banking Supervision Department found a deficiency in the company’s conduct as stated, it was decided to impose a financial sanction on CAL, in accordance with the Supervisor’s authority under Section 14h(a)(1) of the Banking Ordinance, in the amount of NIS 650,000.[1]
It should be noted that the Banking Supervision Department’s examination in this case began as a result of finding a similar broad deficiency at MaxIt Finance Company Ltd., for which a financial sanction was issued against the company on August 3, 2021.[2]
Supervisor of Banks Yair Avidan said, “The Banking Supervision Department is acting to increase enforcement in the consumer field as part of the target of instilling fairness toward the banking system’s customers. From the customer’s standpoint, it is important that there be certainty regarding the beginning and the end of a contractual association, as explicitly set out in the Banking Supervision Department directives. Therefore, debiting a customer after the payment card is cancelled and the contractual association is ended is improper and may harm the customer’s ability to rely on the contract or his rights. The Banking Supervision Department will continue enforcing its directives in order to make sure that the customers of the banks and credit card companies receive proper and fair service.”
[1] The amount is 35 percent less than the maximum of NIS 1,000,000 set out in the law. The reduction was made because in the five years preceding the date of the contravention, CAL did not contravene any of the provisions of the laws set out in the reduction rules. The reduction is in accordance with Section 1(1) of the Banking (Service to the Customer)(Maximum Reductions of Financial Sanction Amounts) Rules, 5771–2011: https://www.nevo.co.il/law_html/law01/500_515.htm (in Hebrew).