Credit Card Company’s Right to Review Credit History Before Approving Purchase

A cardholder who used his credit card to purchase diamond jewelry amounting to over $13,000 experienced delay in obtaining approval of his purchase, causing him some embarassment.  While the purchase was approved by the card company, it took the card company more than an hour to finally send its approval to the merchant processing the transaction. 

Because of the humiliation suffered by the cardholder supposedly arising from the delay, the card holder sued the credit card company for damages.

But the Supreme Court said that the credit card company was not liable to pay damages in this case because the period of time it took to send its approval was justified.  The Court also said:

“The use of a credit card to pay for a purchase is only an offer to the credit card company to enter a loan agreement with the credit card holder. Before the credit card issuer accepts this offer, no obligation relating to the loan agreement exists between them.”

In fact, credit card application forms typically contain terms stating that the credit card company reserves the right to deny authorization for any requested charge.

But in this case, the card purchase was approved ALBEIT with some delay because the card company claimed that it had to examine the credit history and purchase experience of the cardholder first to ensure that the transaction was not a fraudulent purchase, considering that it was a single purchase worth more than $13,000, and it was the first time that the cardholder spent that much on one transaction.

The Supreme Court did not find anything wrong with the delay in this case stating that :

“The right to review a card holder’s credit history, although not specifically set out in the card membership agreement, is a necessary implication of (the credit card company’s) right to deny authorization for any requested charge.”

Added to that, it also noted that:

“There is no provision in the (credit card) agreement that obligates (the credit card company) to act on all cardholder purchase requests within a specifically defined period of time.

Case of : Polo S. Pantaleon vs. American Express International, Inc. (G.R. 174269, August 25, 2010)

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