Should a credit cardholder be liable for purchases made through his lost card?

Facts: Luis Ermitaño was a BPI credit cardholder while his wife, Manuelita Ermitaño, was an extension cardholder. In 1989, Manuelita’s bag which contained the credit card was snatched. Immediately, she reported the loss and thereafter sent written notice to BPI. BPI, however, billed Luis for purchases made through Manuelita’s lost card totalling P3,197.70 citing the following stipulation in their contract: “...the cardholder continues to be liable for the purchases made through the use of the lost/stolen BPI Express Card until after such notice has been given to BPI and the latter has communicated such loss/theft to its member establishments.”

Ruling: The stipulation is not valid. Prompt notice by the cardholder to the credit card company of the loss or theft of his card should be enough to relieve the former of any liability occasioned by the unauthorized use of his lost or stolen card. The questioned stipulation in this case, which still requires the cardholder to wait until the credit card company has notified all its member-establishments, puts the cardholder at the mercy of the credit card company which may delay indefinitely the notification of its members to minimize if not to eliminate the possibility of incurring any loss from unauthorized purchases. Or, as in this case, the credit card company may for some reason fail to promptly notify its members through absolutely no fault of the cardholder. To require the cardholder to still pay for unauthorized purchases after he has given prompt notice of the loss or theft of his card to the credit card company would simply be unfair and unjust. The Court cannot give its assent to such a stipulation which could clearly run against public policy (Sps. Ermitaño vs. Court of Appeals, G.R. No. 127246, April 21, 1999).