By Evelin Charalambous, LLB, LLM, Compliance Consultant
As the global economy accelerates toward a cashless future, credit card fraud has become one of the most pervasive financial crimes of the 21st century. From phishing scams to sophisticated data breaches, millions of consumers and businesses are affected annually.
In the United States, an estimated 31.8 million Americans had their cards compromised in 2014, a figure that highlights both the scale of the threat and the burden on consumers and financial institutions. The United Kingdom faces similar challenges: in the first half of 2021 alone, fraud related losses climbed by 8% to £398.6 million, with over 1.49 million incidents of unauthorized card transactions recorded.
While fraudsters innovate, the real question for policymakers and financial institutions is this: are existing laws robust enough to protect consumers? A comparative look at English and American legislation reveals stark differences, and points to urgent reforms the UK must consider.
The UK Framework: Patchwork Protection
The UK relies heavily on two key statues:
- The Consumer Credit Act 1974 (CCA), Section 75 makes credit card companies jointly liable with merchants for misrepresentation or breaches of contract, provided transactions fall between £100 and £30,000.
- The Fraud Act 2006, Defines fraudulent conduct, including dishonestly obtaining services without payment.
While these provisions provide a foundation, they are narrow in scope and leave critical gaps. If the “debtor-creditor-supplier” chain is broken, Section 75 offers no protection. Victims of modern scams, such as “authorised push payment” fraud, often find themselves uncompensated, despite losing life savings.
The UK’s Payment Services Regulations 2017, derived from EU Directive PSD2, attempted to modernize the framework by mandating strong customer authorization and enhanced fraud prevention mechanisms. Yet, financial institutions continue to rely on the outdated CCA in consumer contracts, a choice that shifts liability onto consumers rather than banks.
The US Approach:Direct and Consumer Centric
By contrast, the United States has adopted legislation directly targeting fraudulent transactions:
- The Fair Credit Billing Act (FCBA)1974, Allows consumers to dispute billing errors and fraudulent charges within 60 days. During investigations, issuers cannot collect disputed payments or charge interest.
- The Electronic Fund Transfer Act (EFTA) 1978, Extends protection to electronic transfers, debit cards, and ATM transactions, limiting consumer liability if losses are reported promptly.
These statutes create a clear and enforceable framework. US consumers typically enjoy stronger remedies and a more straightforward path to justice. Moreover, the American Financial system has been faster to adopt fraud prevention technologies such as chip and PIN verification and AI driven monitoring systems.
Lessons for the UK, and for Cyprus
The comparison exposes a fundamental divergence. The US developed dedicated consumer protection statutes tailored to credit card fraud, while the UK folded limited provisions into broader legislation. As a result, American consumers benefit from stronger safeguards, while UK victims often face uphill battles for redress.
For Cyprus and other EU member states, the lesson is clear: reliance on outdated frameworks risks leaving consumers exposed. Instead, regulators must strengthen enforcement of PSD2, mandate advanced fraud detection technologies, and ensure financial institutions bear greater responsibility for unauthorized transactions.
The Road Ahead: Regulation and Technology
To effectively combat fraud, the UK, and by extension smaller markets like Cyprus must adopt a two pronged approach:
- Legislative Reform, Replace reliance on the CCA with a modern statute modeled on the US FCBA and EFTA, placing clear obligations on banks to protect consumers.
- Technological Innovation, mandate adoption of artificial intelligence and machine learning tools to detect suspicious patterns in real time.
Such measures would not only safeguard consumers but also strengthen trust in digital payments, a vital factor as economies increasingly shift toward cashless systems.
Conclusion
Credit card fraud is not simply a financial crime; it is a systemic risk to consumer confidence and market stability. The UK’s reliance on outdated laws has created vulnerabilities that fraudsters exploit. The United States, though not immune, offers a stronger consumer shield through direct, enforceable legislation.
For both the UK and Cyprus, the path forward lies in reforming legal frameworks, enforcing technological safeguards, and ensuring that financial institutions share responsibility for fraud prevention. Only then can consumer rights be truly protected in a digital economy where fraud never sleeps.
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