Credit card holders are not liable for purchases after reporting loss

A holder of a lost or stolen credit card should not be compelled to pay any purchase using the same card, after he or she reported to the credit card company that such card has been lost or stolen.

This was the ruling of the Supreme Court when it overturned a Court of Appeals decision and upheld a lower court decision freeing from any liability Manuel Acol from purchases drawn from his card after he reported its loss.

Acol lost his credit card on April 18, 1987 and he quickly called up the Philippine Commercial Credit Card Inc., about the loss and requested for an immediate cancellation of the card.

But the next day, he found out that somebody used his card to purchase goods amounting to P76,067 from a department store.

The credit card firm billed Acol the amount but he refused to pay, prompting the firm to file at the lower court a civil case against him.

The firm's lawyers argued that Acol was liable to pay because it was stipulated in his contract with the credit card firm at the time the card was issued to him.

The contract says: "Holder's responsibility for all charges made through the use of the card shall continue until the expiration or its return to the card issuer or until a reasonable time after receipt by the card issuer of written notice of loss of the card and its actual inclusion in the cancellation bulletin."

But the trial court dismissed the case, prompting the firm to raise the matter to the Court of Appeals where it subsequently got a favorable ruling.

This pushed Acol to elevate the case to the SC, which eventually overturned the CA ruling and reinstated the trial court's decision that he was not liable for the purchases made after he reported to the firm the loss of his card.

The High Court said that the provision in the contract with the credit card firm was contrary to public policy under Article 1306 of the Civil Code.

"The effectivity of the cancellation of the lost card rests on an act entirely beyond the control of the cardholder. Worse, the phrase after reasonable time gives the issuer the opportunity to actually profit from unauthorized charges despite receipt of immediate written notice from the cardholder," the SC ruled. - Rene U. Borromeo