Fraud and Forgery: No Liability

Identity Theft, Account Takeover, Unauthorized Use, Misuse, Apparent Authority, Authorized Use.
David A. Szwak

Fraud and Forgery: No Liability

Postby David A. Szwak » Mon Oct 17, 2005 8:17 pm


Cardholder is not liable for balance due on account where wife forged husband's-cardholder's name on credit card application and he knew nothing about the credit card until after he had divorced his wife and he then received bills. First Nat. Bank of Commerce v. Ordoyne, 528 So.2d 1068 (La. App. 5th Cir. 1988), writ denied, 532 So.2d 179 (La. 1988).

Cardholder, an employer, testified that his employee stated she lost her card and that card fell into the hands of a defrauder. Signatures on receipts, from sales made more than 100 miles from area where employee was authorized to use card, were forged with cardholder's name. Cardholder notified credit issuer upon his knowledge of the loss. The Court held that the cardholder was not liable for charges made after he notified the credit issuer that the charges may not have been authorized. Further, cardholder's liability is limited to $50.00 (or the amount of the unauthorized charges prior to notice to credit issuer) for only those charges occurring before cardholder notified the credit issuer of the lost card (unauthorized use) and such liability may only be imposed if credit issuer meets certain conditions. 15 U.S.C. 1643. Cities Services v. Pailet, 452 So.2d 319 (La. App. 4th Cir. 1984), [Pailet follows the Martin v. American Express, Inc., 361 So.2d 597 (Ala. App. 1978), decision and dissent in Walker Bank & Trust Co. v. Jones, 672 P.2d 73, 76 (Utah 1983), (dissent); and is not in accord with Tower World Airways, Inc. v. PHE Aviation Systems, Inc., 933 F.2d 174 (2d Cir. 1991), cert. denied, 112 S.Ct. 87, 116 L.Ed. 2d 59 (1991), (holding notice to issuer is ineffective), or Walker Bank & Trust Co. v. Jones, 672 P.2d 73 (Utah 1983) (majority). So, notification in Louisiana cuts off any and all liability for unauthorized charges]. See: David Szwak, "Credit Cards In America," The John Marshall Journal of Computer and Information Law, John Marshall Law School Law Review, Chicago, Illinois, Vol. XIII, Issue 4, pp.573-584 (Summer, 1995); Bill Effinger, "Making Crime Pay: How Identity Thieves Cash in on Your Credit," New Hope Press, La Jolla, California (1995); David Szwak, "Credit Cards, Credit Reports and Fraud: Enforcing Consumer Rights," The Colorado Lawyer, Colorado Bar Association, Vol.25, No.4, pp.23-28 (April, 1996).

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