TIPS^®  Taiwan Intellectual Property Special

Network Banking and Clients’ Rights and Responsibilities

Embracing the age of on-line services and e-commerce, the Ministry of Finance (“MOF”) of the Executive Yuan published the Model Form Contract for PC Banking and Network Banking Businesses (“Model Contract”) on May 25 this year. Since the publication of the Model Contract, more than ten banks have filed application to the MOF in order to launch network banking services. In the future, banks intending to provide PC banking and network banking services not only need to comply with the security and control protocol established by the MOF, but should also follow the Model Contract for delineating the mutual rights and obligations between banks and clients. Consumers will have direct access to the banks’ financial services via the banks’ own networks.

Provisions in the Model Contract pertaining to consumer rights and interest can be summarized as follows:

1. Transaction risks such as errors in electronic message transmission (Article 10), fund transfers resulting from unauthorized use by a third party of personal identification code of an authorized party (Article 11), and losses due to the delay, omission or errors in electronic message transmission (Article 14) shall be borne by consumers, provided that the bank should still be held responsible for an intentional act or gross negligence on its own part.

2. Both the bank and the consumer should ensure the safety of electronic message transmission and prevent another party to access system or steal, change or damage transaction records and materials without authorization. Under the Model Contract, regarding losses resulting from a hacker’s action, a client seeking to claim compensation from the bank bears the burden of proof for the occurrence of “a third party’s unauthorized access to network by cracking an authorized party’s code or password” (Article 12).

3. Both parties agree that the electronic message exchanged under the contract and the digital signature contained in the contract are both legally binding and shall keep the relevant records for a period of five years (Article 16). Neither party shall deny the validity of the digital signature in case of a dispute (Article 17).

As a well-thought out implementation plan together with associated measures for putting digital signature into practice is still pending, and because the above-mentioned Model Contract imposes upon the consumer greater duty of care and responsibilities concerning dealings transacted on the network, in late September, the Consumer Protection Commission of the Executive Yuan entered into a resolution and proposed certain revision suggestions concerning various provisions in the Model Contract and further requested the MOF to review and revise the Model Contract. As a result, local banks are still waiting for the MOF to update its positions concerning the direction of future development of network banking.