Dear PAO,

I was issued a credit card with a limit of P120,000. However, the issuing bank declined my recent transaction. Can the bank disapprove my purchase request given the issuance of the credit card?

Nat

Dear Nat,

In the case of Rex G. Rico v. Union Bank of the Philippines, GR 210928, Feb. 14, 2022, penned by Associate Justice Ramon Paul Hernando, the Supreme Court discussed the use of the credit card, viz:

“To reiterate, ‘the use of a credit card to pay for a purchase is only an offer to the credit card company to enter into 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.’ Thus, Union Bank has no obligation to enter into a loan agreement with Rico when the latter tendered his offer by using his Union Bank Visa credit card to pay for his purchase at Gourdo’s Restaurant. Rico cannot, therefore, demand from Union Bank to loan him or to pay for his purchase at Gourdo’s Restaurant by virtue of the issued Visa credit card. ‘A demand presupposes the existence of an obligation between the parties.’ xxx

“However, We recognize that when Union Bank issued a Visa credit card to Rico, the parties entered into a contractual relationship governed by the terms and conditions found in the card membership agreement, which constitute as the law between the parties. xxx

“The Terms and Conditions did not expressly state that Union Bank would honor all purchase requests of Rico at all times. Nonetheless, with the issuance of the credit card, Union Bank granted Rico credit card privileges, which the latter may use in payment for goods and services. Thus, although the credit card company may disapprove the card holder’s credit card transaction, it shall do so justifiably and within the bounds of laws and the credit card membership agreement. Otherwise, it would be futile to procure a credit card without a reasonable expectation that the card company will approve the cardholder’s purchase requests despite being in good credit standing and abiding by the terms and conditions. xxx

“Based on the foregoing, we find the disapproval of Rico’s credit card on November 20, 2005 as justified and done in good faith. Union Bank neither breached its contract with Rico nor acted with willful intent to cause harm when it revoked Rico’s credit card privileges when he failed to pay the minimum amount due on his SOA dated October 16, 2005. Nobody can be faulted for Rico’s alleged humiliation or embarrassment in Gourdo’s Restaurant but himself. Damnum absque injuria — there can be no damage without injury when the loss or harm was not the result of a violation of a legal duty.” (Emphasis and underscoring supplied)

Accordingly, the credit card issuer may or may not approve purchase requests based on the credit card holder’s standing, credit card history, and financial capability. However, the credit card issuer is also bound by the terms and conditions of the credit card membership agreement between it and the credit card holder. As such, there must be a justification for the disapproval of a purchase request. In your case, the circumstances surrounding the disapproval of your recent transaction must be examined to determine if the issuer of your credit card has a valid and justified reason for turning down your purchase.

We hope that we were able to answer your queries. This advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated on.

Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to dearpao@manilatimes.net