How an Australian Couple Recovered NIS 61,400 in Israeli Card Fraud

Result: NIS 61,400 of fraudulent card charges credited back at the original value dates, with the couple's statutory exposure held to NIS 225 · Timeline: 5 months · Challenge: Bank ran the liability clock from the wrong date · Authority: Banking Supervision Department, Bank of Israel · Financial Impact: NIS 61,400

Background

A married couple in their late sixties, both retired teachers living in Melbourne, kept a current account at an Israeli bank branch in Ramat Gan. They had opened it years earlier to receive rent on a two-room flat they had inherited, and the card attached to the account existed for one narrow purpose: paying arnona (municipal property tax), the va'ad bayit (building committee) levy and the occasional plumber. They used it perhaps six times a year, always while visiting.

Between mid-November and late January the card was used 71 times in Israel and online, for NIS 61,400 in total, roughly AUD 25,000. Neither of them was in the country for a single one of those transactions. The bank's fraud alerts went out by SMS to an Israeli mobile number that had been disconnected since 2019, and the paper statements posted to Melbourne arrived three to four weeks after each cycle closed. By the time the December statement was opened and read, the card had been running for nine weeks.

The Challenge

The couple telephoned the branch on 6 March, the day they finished reconciling the statements, and put the fraud in writing by email five days later. The branch's answer, delivered in a short letter three weeks after that, was that they had been careless with the card, that the loss had been discovered late, and that the bank would not be reversing the charges. The letter cited the Debit Cards Law 5746-1986.

That citation was the whole case. The Debit Cards Law was repealed by Section 55 of the Payment Services Law 5779-2019 with effect from 14 October 2020, and Israeli card fraud has been governed by the newer statute ever since. The rules that replaced it are not a mild restatement. Section 24(b) of the Payment Services Law provides that the payer bears no liability at all for misuse (shimush lera'a) occurring after notice is given to the provider. Section 24(c) caps liability for misuse occurring before notice at a low fixed sum plus a daily amount, and the daily amount runs from the moment the payer became aware of the theft, loss or misuse, not from the date of the first fraudulent charge. That distinction was worth about NIS 61,000 here. The branch had been counting from mid-November. The statute counts from 6 March.

Two further features of the Australian position shaped how the case had to be run. The couple could not walk into the branch to sign the fraud declaration the bank's procedures called for, and Israeli banks are reluctant to accept a signature that has not been given in front of someone they recognise. Their own bank in Australia could do nothing for them either, because the card was Israeli-issued, the account was Israeli, and the Australian Financial Complaints Authority has no reach over a branch in Ramat Gan.

In Practice: Section 24 of the Payment Services Law 5779-2019 caps a payer's exposure for misuse before notice at NIS 75 plus NIS 30 for each day between becoming aware of the misuse and giving notice, with an overall ceiling of NIS 450 where notice is given within 30 days of the first unauthorised transaction, and no liability at all for anything charged after notice under Section 24(b). Section 27 then requires the provider to return the charged amounts within eight business days of the notice, credited at the original charge date rather than the refund date. Where the bank refuses, the file goes to the Public Enquiries Unit of the Banking Supervision Department at the Bank of Israel (Bank Yisrael), which supervises the issuer directly.

What We Did

The first step was documentary, and it had to be taken before any argument was put to the bank. We asked the couple for everything that fixed the date of awareness: the postmarked envelope the December statement had arrived in, their telephone records showing the 6 March call to the branch, and the sent copy of the 11 March email. Five days elapsed between awareness and notice. Under Section 24(c) that produced a statutory exposure of NIS 75 plus five daily increments of NIS 30, which is NIS 225 against NIS 61,400 of charges.

We then filed a written demand with the bank's legal department rather than the branch, because branch staff do not decide a fraud file and rarely know that the 1986 statute is gone. The demand set out four things: the repeal date of 14 October 2020 under Section 55, the Section 24(c) calculation with the evidence for each date, the Section 27 eight-business-day return obligation, and the fact that the bank had never alleged the only thing capable of removing the caps. Section 26 lifts the limitation of liability where the payer acted with fraudulent intent, and nothing in the file came close to that. Carelessness, which is what the branch letter actually alleged, is not the statutory test.

Three practical items were dealt with from Melbourne in parallel. The bank wanted the card frozen, which we requested in writing on the couple's behalf under Section 22, the provision entitling a payer to demand that use of a payment means be frozen. It wanted a police reference, so a complaint was filed with the Israel Police naming the merchant locations taken off the statements. And it wanted a signed fraud declaration, which was handled through a limited power of attorney signed before a notary in Melbourne, apostilled by the Department of Foreign Affairs and Trade at AUD 102 per document with a turnaround of about three business days, then sent to the bank in the original. Non-residents who bank in Israel meet this document chain constantly, and it is why we tell clients to keep a standing Israeli power of attorney on file rather than build one under pressure. The same friction appears when opening an Israeli bank account as a non-resident, for the same underlying reason.

When the bank's legal department let five weeks pass without a substantive reply, the file went to the Public Enquiries Unit of the Banking Supervision Department at the Bank of Israel, with the correspondence attached in date order. Supervisory complaints against Israeli banks work best when they are short and arithmetical. Ours ran to two pages and led with the repeal.

In Practice: Section 55 of the Payment Services Law 5779-2019 repealed the Debit Cards Law 5746-1986 on 14 October 2020, so an Israeli bank letter still resting on the 1986 statute is resting on nothing. The only route out of the Section 24 caps is Section 26, which requires fraudulent intent by the payer, a far higher bar than the carelessness banks tend to allege. A complaint to the Banking Supervision Department at the Bank of Israel costs nothing to file and, in a file of this size, produced a bank response in about six weeks, against the NIS 15,000 to NIS 30,000 that running a District Court claim for NIS 61,400 would have cost.

The Outcome

The bank credited NIS 61,400 back to the account five months after the first telephone call, with value dating to the original charge dates rather than the refund date. That detail carried real money, because the account had slipped into overdraft in January and interest had accrued on funds the couple never spent. The interest was reversed with the principal. Their retained exposure was NIS 225, the figure Section 24(c) produces on a five-day gap between awareness and notice. No claim was filed and no hearing took place.

They also closed the card, replaced the disconnected Israeli mobile number on the bank's records with a Melbourne number that can actually receive the alerts, and moved to monthly online statements. That second change is the one that would have stopped the whole episode. Nine weeks of undetected use is a long time, and the cause was not the fraud itself but a warning system pointed at a telephone that had been out of service for six years.

Key Takeaways

What this case illustrates for non-residents in similar situations:

1. Check which statute the bank is quoting. The Debit Cards Law 5746-1986 has been repealed since 14 October 2020, and Israeli branch letters still cite it. A refusal letter built on the 1986 law was written from a template older than the rules that now apply.
2. The clock that matters runs from awareness, not from the first charge. Section 24(c) of the Payment Services Law 5779-2019 measures exposure in days between finding out and telling the bank. Nine weeks of undetected fraud does not enlarge your liability if notice followed discovery by five days, so preserve the evidence of when you found out.
3. Give notice in writing and keep the proof. A call to a branch is a date you will later have to prove. An email, with the sent copy retained, fixes it beyond argument.
4. Keep the bank's contact details alive after you leave Israel. Alerts sent to a disconnected Israeli SIM are the most common reason non-residents learn of card misuse weeks late, and statements posted abroad arrive far too slowly to catch it.
5. Go to the regulator before you go to court. The Banking Supervision Department at the Bank of Israel supervises the issuer, charges nothing to complain, and works in weeks. A District Court claim for a sum of this size costs more than the exposure it is meant to protect.

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Facing a Similar Situation?

If charges you never made have appeared on an Israeli card or account, two dates decide most of what follows: when you became aware, and when you gave notice. Establish both, with documents, before you argue anything with the branch.

Contact us for a confidential consultation about your Israeli legal matter.