Reading the small print: Terms, Conditions and Duty of Care
The Quincecare duty has been an area of evolution since the 1980s, when it was first introduced. It’s about the duty of banks to look out for the potential for their customers to be defrauded, but the current reality is that the duty is not the saviour for victims of financial fraud.
There is not a wide-ranging duty for banks to be on the lookout for their customers in relation to the risk of fraud. The problem is that the duty is not codified in any legislation or regulation, so our banks don’t know prescriptively what they’re looking for. One option to reduce risk is now being taken by some banks with regards to amending their terms and conditions, especially for business customers, to exclude the Quincecare duty of care.
It’s certainly possible, as we’ve seen in the recent JP Morgan case, that terms can be written into terms of business for a customer to exclude that duty of care. Some banks are looking at creating wording in their terms and conditions whereby they can effectively carve out any liability.
Also, your customer needs to be aware of changes to their terms and conditions and those changes must be clear to read. The risk, otherwise, is that a customer may dispute the amendments. Organisations must be prepared for the fact that customers who lose money to fraud may try and challenge the fairness of the clause excluding the Quincecare duty.
There are definitely banks that are looking at changing their terms in relation to Quincecare. This is often because of the uncertainty they’re facing with regards to how far they’re expected to go with it, particularly with regards to business customers. It’s essentially about trying to manage their customers’ boundaries and their own liabilities because there isn’t clear guidance in place telling banks exactly what they should do and what they shouldn’t.
If the Quincecare duty is here to stay, which it looks like it is, it would help customers for parties on both sides of the fence to understand what that duty really looks like. We need to be asking if the Law Commission could look at it, whether the duty could be codified and exactly what that means with regards to what the banks need to be doing.
Once that clarity is in place, we won’t find organisations and customers getting stuck in this grey area leading to litigation – and the associated risks, cost and emotional turmoil this type of dispute can lead to.