Banks play an important role in society. They are the oil man of the economy and have special expertise in the field of financial products and financial services. This special expertise is not present with bank customers and, in particular, not with private individuals. The bank must therefore ensure that the economy continues to run and that no irresponsible risks are run by persons unaware of those risks or taking too many risks. Such a duty of care is not uncommon for other professional contractual relationships. Every contractor has a duty of care. Article 7: 401 of the Dutch Civil Code stipulates that the service provider must observe the care of a prudent service provider. Given the special position that banks occupy in society, on top of this general principle banks have a special duty of care, which is laid down in financial legislation, regulations and in case law of the Netherlands Supreme Court.
The law and case law show that a bank has a special duty of care towards its customers in the pre-contractual phase, during the execution of the financial services and also upon termination of the relationship. The bank also has a special duty of care vis-à-vis third parties. In addition, the bank must also adhere to the increasingly complex regulations.
The doctrine of the duty of care of banks has first been confirmed by the courts in cases regarding stock option trading. There, a customer who is inattentive can quickly lose all the invested capital and even be obliged to make additional payments.
The Rabobank / Everaars judgment of the Netherlands Supreme Court of 23 May 1997 formulates for the first time the special duty of care of banks in option trading. The Supreme Court formulates it as follows. A bank receiving orders from its private clients to execute option transactions is, as a professional and highly regarded service provider, bound to a special duty of care, given the very high risks that may be associated with such transactions.
This duty of care aims, among other things, to protect the client against the danger of his own lightness
or lack of insight. The extent of that duty of care depends on the circumstances of the case, including any expertise of the customer. If the duty of care has been violated, the bank is liable and, depending on the circumstances, it will have to compensate the damage suffered, or a part thereof.
Another area where banks have a special duty of care is in the case of excessive lending. It is regulated by law that banks refuse credit to a consumer if this were irresponsible given the borrower's personal circumstances (Section 4:34 (2) of the Financial Supervision Act). A bank that grants irresponsible credit violates its duty of care and thereby acts unlawfully towards the consumer. Before the specific provision was included in the Financial Supervision Act, that special duty of care already existed as a general principle. Judgments of the Netherlands Supreme Court show that between 1999 and 2003, banks already had to obtain information about customers'income and capital position in order to prevent excessive lending due to the bank's special duty of care prior to granting mortgage credit to a consumer. Quite a lot of old cases are still pending, as in the past, banks carelessly dealt with the granting of loans, especially in the period before the credit crisis.
A professional lender also has a special duty of care towards a private guarantor, the purpose of which is to ensure that the latter is aware of the risks he or she incurs by providing a guarantee for a third party debt. The private guarantor must also be protected under certain circumstances by the duty of care of banks against their own lack of thought. If this is not done, it may just be the case that the bank cannot derive any rights from the bail.
There is, of course, a point where the duty of care ends and where own risk assessment or carelessness comes at its own expense. As a rule, this is the case for entrepreneurs who apply for a business credit and, for example, act as a privat guarantor for their own business loan.
The decision of the Amsterdam Court of Appeal of 14 May 2019 between ING Bank and Footlocker is a good example of a case in which the bank had breached the duty of care towards a third party. The case concerned so-called invoice fraud. Criminals had stuck yellow stickers on UPS invoices with a different bank account number, namely that of an Amsterdam resident who had just founded the one-man business UPS Consultancy and had also opened a bank account at ING Bank. A Footlocker employee entered the other number into the systems, after which a total of almost two million euros was transferred to the account of this fake consultancy company. Big cash withdrawals followed and a lot of money was transferred abroad and the criminals allegedly bought gold with it in Belgium and Germany. The Amsterdammer who probably acted as a figurehead has been sentenced to imprisonment for money laundering, but the money is gone.
Footlocker has successfully held ING Bank liable. The bank had not properly followed up Internal reports and alerts regarding unusual transactions in the newly opened bank account. Because the bank knew of the unusual transactions in the bank account of this starting entrepreneur and of potential risks for third parties, in the opinion of the Court of Appeal, the bank is partly to blame for the losses incurred by Footlocker. ING Bank has insufficiently followed up on the unusual transactions identified and has not blocked the bank account in time. Footlocker is also to blame, because it could have paid better attention. The final assessment is that the bank must bear half of the damage suffered after the alert came up and no sufficient action was taken.
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