The Congress (Legislative Assembly) has advanced legislation that would hold banks financially responsible for fraud committed against their customers.

The lawmakers commission unanimously approved Bill No. 23,908 in its first round of voting. The measure, titled “Law for the Protection of Individuals in the Custody of Their Money Managed by Any Banking Entity, Whether Public or Private,” would require banks and other financial institutions (both public and private) to compensate customers who are victims of fraud if it receives final approval.

The proposal seeks to amend the current Law on the Promotion of Competition and Effective Consumer Protection, as well as the General Law of Public Administration. The reforms would establish bank liability when a customer experiences an unauthorized withdrawal of funds.

 

The bill would also reverse the current burden of proof. Under existing practice, customers must demonstrate that they were victims of fraud. The proposed legislation would instead require banks or financial institutions to prove the origin of the fraud, if any.

Lawmakers are expected to send the bill to a second round of review in the coming days, where it will face a final vote for approval or rejection.

The measure has sparked significant debate in the financial sector. Just hours after the preliminary vote, three state-owned banks (Banco de Costa Rica, Banco Nacional and Banco Popular)  announced they were withdrawing from the Costa Rican Banking Association, known as ABC.

The decision followed initial statements from the association indicating that the proposed reform in favor of fraud victims was considered balanced.

The banking association is expected to address this in the coming days, explaining the reasons behind the state banks’ decision to resign from the organization.

The Congress is composed of 57 deputies, who are elected by direct, universal, popular vote.

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