Under what conditions is the liability of an agent bank established when issuing cards?

The notion that liability rests solely with the sponsoring bank reflects the traditional structure of relationships within the card issuance framework. The sponsoring bank takes on the primary responsibility for issuing the cards and managing the associated risks. This is fundamentally due to their role in underwriting the transactions, establishing relationships with card networks, and providing necessary customer service and support.

In most models, the sponsoring bank assumes the financial risk connected to card transactions including chargebacks, fraud, and other associated costs, while the agents act to facilitate the distribution and servicing of the cards. This delineation of responsibility is important within the payments ecosystem, as it helps to ensure a clear understanding of risk management and liability.

As such, while other stakeholders may have some responsibilities, the primary liability for issuing cards and managing potential fallout from transactions remains with the sponsoring bank, and this structure is often reinforced by regulatory guidelines and industry practices.