After reading Is the issuance of pre-approved credit cards allowed?, read also May credit card issuers engage third party service providers for collection purposes?
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Pre-approved credit cards refer to unsolicited credit cards issued by credit card issuers to consumers
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The credit card provider must prove that its client read and consented to the terms and conditions governing the credit card’s use
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Failure to prove consent means that the client cannot be bound by the terms and conditions of the credit card
Pre-approved credit cards refer to unsolicited credit cards issued by credit card issuers to consumers who have not applied for such credit cards.
What are the possible consequences of issuing pre-approved credit cards?
For a better understanding, let us take the case of Bank of the Philippine Islands vs. Spouses Sarda, G.R. No. 239092, June 26, 2019.
In this case, the Bank of the Philippine Islands (BPI) filed a Complaint against Spouses Sarda. BPI alleged that it issued a credit card to Mr. Sarda under terms and conditions attached to the card upon its delivery. Spouses availed of BPI’s credit accommodations by using the said credit card and eventually incurred an outstanding obligation of ₱1,213,114.19 per BPI statement of account, dated September 22, 2013. Based on the bank’s records, Mr. Sarda’s last payment prior to the cancellation of the BPI credit card was on March 15, 2013, as shown in the March 20, 2013 statement of account. Despite demands for payment, Mr. Sarda refused to settle the obligation.
BPI thus prayed that judgment be rendered against the spouses ordering them to pay the principal amount of ₱1,213,114.19: ₱443,915.46 representing 3.25% finance charge per month and 6% late payment charges per month from October 2013 to February 2014; finance charge at the rate of 3.25% per month and late payment charges amounting to 6% per month or a fraction of month’s delay starting March 2014, until the obligation is fully paid; attorney’s fees equivalent to 25% of the total claims due and demandable, exclusive of appearance fee for every court hearing; and the costs of suit.
On the other hand, spouses denied having applied for or having received the credit card issued by BPI. They asserted that they had not used said credit card as they did not have physical possession of it. They likewise denied having signed or agreed to the terms and conditions referred to in the complaint, and much less, incur an outstanding obligation of ₱1,213,114.19. Accordingly, they prayed for the dismissal of the complaint and the grant of their counterclaim for attorney’s fees in the sum of ₱100,000.00.
Are the spouses liable for the purchases accumulated under the credit card issued by BPI?
The Supreme Court said:
No.
The Supreme Court affirmed the decision of the Court of appeals in saying that the spouses cannot be made liable to pay for the purchases accumulated under the credit card issued by the BPI for the following reasons:
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BPI failed to prove that Mr. Sarda had physical possession of the principal credit card issued in his name, and that his alleged representative was authorized to receive the same;
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BPI failed to prove that Mr. Sarda authorized the issuance of a supplementary card in favor of his alleged representative;
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BPI failed to prove the receipt by spouses of the monthly billing statements and demand letter; and
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BPI failed to observe extraordinary diligence and reasonable business prudence in issuing the subject credit cards.
Also, in a similar case decided by the Supreme Court, it ruled that when issuing a pre-screened or pre-approved credit card, the credit card provider must prove that its client read and consented to the terms and conditions governing the credit card’s use. Failure to prove consent means that the client cannot be bound by the provisions of the terms and conditions, despite admitted use of the credit card.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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