ID Theft Victim a "Cardholder" under TILA?

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David A. Szwak

ID Theft Victim a "Cardholder" under TILA?

Postby David A. Szwak » Mon Oct 10, 2005 5:04 am

Brief Excerpt: Poulson v. Trans Union, et al, ED Texas


"Oddly, Defendant Citibank has historically and repeatedly tried to push the envelope in arguing for arbitration. Defendant Citibank has claimed that pleading that an identity theft victim fits within the TILA definition of “cardholder” binds the victim to the terms and clauses in the fraudulent application. A review of TILA shows that a "cardholder" is generally defined as the person whose identity is listed on the credit application made to the issuer. In the only case directly on point, the court held that an identity theft victim “is a cardholder” yet not responsible for the account. Baker v. Citibank [South Dakota] N.A., 13 F.Supp.2d 1037 [U.S.D.C. S.D. Cal.1998] [same defendant conglomerate as in this case: “The parties have not cited, nor has the Court's independent research revealed, any California or federal case that has construed the meaning of "cardholder" in this context. One Michigan case, however, provides guidance by analogy. In Michigan v. Collins, 158 Mich.App. 508, 405 N.W.2d 182 [1987], an imposter obtained a credit card in the name of Theresa Holland. A Michigan statute criminalized using a credit card without the consent of the cardholder. The statute defined a cardholder as "the person or organization who requests a credit card and to whom ... a credit card is subsequently issued...." Id. 405 N.W.2d, at 183 [quoting Mich.Comp.Laws. §750.157m[b]. The defendant argued that because Theresa Holland had not requested the credit card, she was not a cardholder within the meaning of the statute. The court rejected this argument, stating: ... In our opinion, defendant construes the statute far too narrowly. The statute is designed to protect ... the person in whose name a card is issued.... In the instant case, the credit card was issued pursuant to solicitation from one whom the issuer believed to be Theresa Holland. Construed in this manner, Holland was a cardholder. Construed narrowly, as defendant urges, the statute affords no protection to the real cardholder ... where persons representing themselves to be someone else request and receive a credit card. We do not believe that the Legislature intended to exclude from the act's operation fraudulent users who obtained unrequested cards.... Id. 405 N.W.2d, at 184. The Court finds this reasoning persuasive. Citibank's narrow interpretation boils down to the argument that if a consumer did not physically receive a card, the consumer is not a cardholder. Citibank's interpretation would remove the protections of the SCCA from an entire group of innocent consumers. This would be so even though the credit cards bear their names, use their social security numbers, and, if left unpaid, could damage their credit ratings. This is an odd interpretation indeed, and it circumvents the statute's obvious purpose of protecting consumers. [emphasis added.].”] Regardless, the cardholder is not liable for fraud perpetrated through the use his identifiers. First Nat. Bank of Commerce v. Ordoyne, 528 So.2d 1068 [La. App. 5 Cir. 1988], w.d., 532 So.2d 179 [La. 1988]; Union Oil Co. v. Lull, 349 P.2d 243 [Or. 1960].

The Truth-In-Lending Act defines "cardholder" as "any person to whom a credit card is issued or any person who has agreed with the card-issuer to pay obligations arising from the issuance of a credit card to another person." 15 U.S.C. 1602[m]; American Airlines, Inc. v. Remis Industries, Inc., 494 F.2d 196 [2nd Cir.[N.Y.]1974].

As plead and shown, Defendants Sears/Citibank allegedly issued an authorized user status in plaintiff’s identity. Interestingly, the Texas Penal Code, in reference to credit card fraud defines “Cardholder" as “the person named on the face of the debit card to whom or for whose benefit the card is issued. Tex. Pen.Code Ann. §32.31[a][1] [Vernon 1998]; In re C.P., 998 S.W.2d 703 [Tex. App. - Waco 1999].

Numerous other jurisdictions follow this same definition. See, ex., Hill v. Com., Not Reported in S.E.2d, 2002 WestLaw 799835, [Va. App. 2002]; State v. Rawlins, 166 N.C.App. 160, 601 S.E.2d 267 [N.C. App. 2004]; Thomas v. State, 176 Ga. App. 771, 337 S.E.2d 344 [Ga. App. 1985]; State v. Ulmer, 21 Ariz.App. 378, 519 P.2d 867, [Ariz. App. Div. 1 1974]."

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