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The need for verification

Tuesday, 11 October 2011 09:44am

©The Star (Used by permission)
ARTICLES OF LAW By BHAG SINGH

It is important for banks to ascertain the identity of credit cardholders before proceeding further when making calls.

A LARGE percentage of the population owns credit cards. How actively or aggressively the holder uses them is another matter. Though concerns have been raised about credit card debts, issuers of credit cards continue to actively promote their usage.

At one time, a credit card was viewed as a status symbol. However, today the credit card has become a utility item.

Convenience aside, there is also the problem of being chased when a cardholder does not pay on time. One such cardholder narrates his experience of being called up by the bank when his payment was overdue. He was not only reminded about the payment but also put through a series of questions pertaining to personal details before the reminder was conveyed.

The reader wants to know why the card issuer – which refers to the representative who called up on its behalf – can’t just ask the cardholder to pay up instead of putting him through a list of questions? After all, the cardholder is not asking for any additional or new facility or special terms.

A cardholder may feel that if he is applying for a facility or for better benefits or an increased credit limit, it may well be relevant to verify his identity. But if it is merely to ask him to pay up, what is the need for verification?

Need to call

To start with, such calls when they are made and received, are due to the cardholder having defaulted in his payment. Therefore, one can also say that if payment had been made at the appropriate time as agreed, there would have been no such calls in the first place.

On the other hand, from the point of view of the cardholder, he may no doubt have defaulted and is eventually going to pay. In fact, he will be charged interest and perhaps other charges which may be substantial, considering the rate.

So from the point of view of the cardholder, any delay does not actually prejudice the card issuer. On the contrary, it generates more earnings. So why is there a need to go through all those questions to convey a simple reminder?

Verification

Whilst the cardholder may consider such calls as a harassment, the card issuer may consider itself as being kind to the cardholder and was using the occasion merely to remind the cardholder to pay up, instead of acting more harshly, whatever that may mean.

Card issuing organisations may well realise the annoyance factor of a long list of questions before actually talking about the overdue payment. Such annoyance by itself may well serve a purpose in making the cardholder pay up promptly in future to avoid such calls.

However, the card issuer may have better reasons than this. What is harassment to the cardholder may well be prudence in the eyes of the card issuer in asking for all personal details before talking to him about the overdue account. This action is called verification.

Herein lies the need to verify. This is because the card issuer may very well call the telephone number of the cardholder but someone else may pick up the phone and respond at the other end. The card issuer may therefore be speaking to a third party and not the cardholder. They will then be giving details of the default, the debt and the amount owing to a third party. Such communication to a third party may be defamatory to the cardholder.

In the context of present day developments and technology, it is unlikely that such mistakes will occur. However, the possibility cannot be ruled out. Steps to verify the identity are therefore a matter of prudence.

Of course, if at the time the cardholder is indeed indebted to the card company and has delayed payment, it is another matter. In such case the statement, even though conveyed to a third party, could be true and therefore the defence of justification available.

Notwithstanding that such an error is unlikely, if it happens there could be serious consequences. It may just happen that the erroneous information may have been conveyed to a business partner who happens to pick up the phone. As a result, a potential business deal is scuttled.

Obligation

There is another aspect to the card issuer seeking verification. Cards are today issued mainly if not invariably by banks and here the issue of the secrecy obligation may be a relevant consideration.

The card issuer who has called the cardholder will necessarily need to give details of the payments made, credited and due, if the person on the other side of the phone asks for them. Whilst the phone may belong to the cardholder, the information may otherwise be disclosed to a person who is not the cardholder. This could have civil and statutory implications.

Whilst the need for the card issuer to verify the identity of the cardholder is important, in many cases the cardholder also receives calls from or on behalf of the card issuer through unlisted numbers.

This creates a risk to the cardholder that he may be disclosing personal information to an unknown person. Therefore, it is also important for the cardholder, while complying with the request for verification, to protect himself. A cardholder should only give information relevant for the purpose of the credit card and nothing else.

On the part of the card issuers, it would help their customers if a message could be left on the phone where possible to ask the cardholder to return the call about their account.

At the end of the day, it cannot be denied that cardholders who have used up their credit will need to pay. The card issuer needs to get its money back. Everyone should make things easier for each other to ensure a better society for all.

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