Co-written by Manuel Nuñez

The Spanish Supreme Court has recently issued a significant judgement regarding the use of credit cards under Spanish Law and, in particular, the claim by the issuer of such payment methods of the sums resulting from the use thereof, as well as the burden of proof in said claims.

The purpose of this short article is to summarise the main features of the current Spanish legal framework relating to the use of credit cards and analyse how the aforementioned judgement, dated December 21, 2001, may contribute to the clarification of said regime.

I. Spanish legal framework relating to the use of credit cards

Although the use of credit cards, debit cards ("tarjetas de débito")1 and "company-specific" cards (hereinafter and indistinctly "credit cards", unless otherwise stated herein)2 has dramatically increased in Spain over the last two decades, Spanish Law does not provide, for the moment, a specific legal regime on the use thereof, the rights and obligations of the parties intervening in said transactions, their liabilities and the burden of proof in the event of any of the parties failing to meet its obligations.

Despite this, transactions involving the use of credit cards may fall under the scope of Spanish Law 26/1984 on the Defence of Consumers and Users, as well as Article 46 of the Spanish Law 7/1996 governing Retail Trade. The former intends to provide a sound regime of protection of those consumers and users entering into standard contracts with other parties in the context of unequal bargaining power; and the latter provides specific rules for the use of credit cards in "remote sales" ("ventas a distancia").

However, the most significant rules concerning the use of credit cards in Spain are not contained in any of the regulations passed by national bodies, but are rather contained in three Recommendations of the European Union:

87/598/EEC Commission Recommendation of December 8, 1987, on a European Code of Conduct relating to electronic payment (Relations between financial institutions, traders and service establishments, and consumers);

88/590/EEC Commission Recommendation of November 17, 1988, concerning payment systems, and in particular the relationship between card holder and card issuer; and

97/489/CE Commission Recommendation of July 30, 1997, concerning transactions by electronic payment methods and, in particular, the relationship between issuer and holder.

Likewise, the Council Directive 87/102/CEE, of December 22, 1986, relating to credit to consumers, which was implemented by the Spanish Law on Credit to Consumers, may apply to certain transactions involving the use of credit cards3. In addition, the Code of Banking Practices of the European Bankers Association may provide some further directives on the appropriate use of these payment methods.

In this context, case law is essential in order to clarify the regime applicable to credit cards in Spain, as well as the decisions issued by the Claims Division of the Bank of Spain ("Servicio de Reclamaciones del Banco de España").

In view of the above, the main obligations and liabilities of the three relevant parties4 intervening in the issue and use of credit cards, under Spanish law, may be summarised as follows:

I.1. Obligations of the holder

Pursuant to the contract concluded with the issuer, the holder will be obliged:

(i) to pay the fees due as a result of holding the credit card, in the terms provided by the contract, always assuming that the relevant card has been dispatched to the holder in response to an application from him/her (as established in Section 5 of the Annex to the aforementioned Commission Recommendation 88/590/EEC);

(ii) to sign the card once it has been received, keep it safe and notify the issuer without delay5 after becoming aware of the loss or theft of the payment methods and similar situations;

(iii) to refrain from recording his/her personal identification number or other code in an easily recognisable form (e.g. the credit card or any item which the holder keeps or carries with the credit card);

(iv) to use the credit card in accordance with the terms set forth in the contract governing the issuing and use thereof;

(v) to notify the issuer of any change in his/her personal data related to the contract concluded between issuer and holder;

(vi) not to cancel a determined order which he/she has given by means of his/her credit card (in accordance with Section 4.1.d) of the Commission Recommendation 88/590/EEC); and

(vii) to pay the amounts due as a result of the transactions carried out by means of his/her credit card, to the issuer (always considering, in this point, the differences between credit cards and debit cards).

I.2. Obligations of the traders adhered to the system

In respect of the contracting holder, the relevant trader is obliged:

(i) to accept the relevant credit card as a payment method in its establishment/s (once it has verified the adequacy of the credit card), and abstain from proposing or requiring the use of an alternative means of payment (e.g. cash, cheques, etc.);

(ii) not to modify its prices or selling conditions depending on whether the payment is carried out by means of a credit card or other instrument;

(iii) to give enough notice of the possibility of using the credit card in its establishment, and locate the terminal of use in an appropriate place in said establishment in order for the holder to use it safely and efficiently; and

(iv) to issue and deliver to the holder the corresponding invoice, bill or receipt providing evidence on the transaction.

In addition, traders are obliged, in respect of the issuer, to follow the instructions and use the supplied means of collection in the terms established in the contract entered into with the issuer; to keep records and supporting documentation (invoices, bills, receipts…) of the transactions entered into with each of the credit card holders, which may be consulted and inspected by the issuer as agreed; to collect the signature of each of the holders and to verify whether the signature in the credit card coincides with the signature on each invoice/bill or not; to communicate any change in its data that might affect the activities carried out by virtue of the contract; to pay the corresponding taxes and commissions, as agreed.

I.3. Obligations of the Issuer

The issuer is obliged to pay to those subscribed traders the amounts due as a result of the transactions entered into by the card holders with such traders, in the terms set forth in the corresponding invoices or bills; and is also obliged to warrant the correct operation of the system to the card holders.

In addition, the issuer cannot disclose the holders’ personal identification number or other code, except to the holder; and must ensure that appropriate means are available to enable the holder to make the necessary notification in the event of loss or theft of the credit card, and annul it in such cases; and must send a bank statement indicating the account balance to the holder on a monthly basis; and ensure that the traders subscribe with adequate means (TPV, invoice forms, printer, etc…) in order to warrant the complete operation of the system.

I.4. Liability of the Issuer: burden of proof

Commission Recommendation 88/590/EEC clearly states, in its Section 6.1., that, in relation to the operations falling within its scope (as established in its section 1), "issuers shall keep, or cause to be kept, internal records which are sufficiently substantial to enable operations to be traced and errors to be rectified", adding that "to this end, issuers shall make the requisite arrangements with the system providers, as necessary".

In addition, Section 6.2. of the same Recommendation sets out that in any dispute with a contracting holder concerning any of the following operations:

electronic payment involving the use of a card, in particular, at a point sale;

the withdrawing of bank notes, the depositing of banknotes and cheques, and connected operations, at electronic devices such as cash dispensing machines; and

electronic payment made by a member of the public without the use of a card, such as home banking;

and relating to liability for an unauthorised electronic fund transfer, the burden of proof shall be upon the issuer to show that the operation was accurately recorded, had been accurately entered into accounts and was not affected by technical breakdown or any other deficiency.

Such interpretation has been followed in the main part of the occasions by Spanish Courts (e.g. Judgement of the Provincial Court of Alicante of January 18, 1993; Judgement of the Provincial Court of Oviedo of June, 17, 1992) in relation to the second of the aforesaid operations (operations with cash dispensing machines). In addition, the Claims Division of the Bank of Spain has stated that the eventual liability for any breakdown in the system shall be with the entity which has established the system, instead of the card holder, who has simply used it.

In spite of this, , the Spanish Supreme Court had not yet clearly extended this interpretation to encompass the transactions mentioned in section (i) above herein (i.e. electronic payment involving the use of a card in a particular point of sale), where providing enough evidence on the actual performance of such transactions entails not only the maintenance of an adequate register of operations by the issuer, but also obtaining the corresponding supporting documentation (bills, invoices, receipts…) from the traders which have subscribed to the system. Judgement 1212/2001 of the Spanish Supreme Court, of December 21, provides significant clarification in this regard.

II. Judgement of the Spanish Supreme Court (Civil Chamber) of December 21, 2001

Since, as stated above, case law is essential in order to clarify the legal regime to be applied to the use of credit cards in Spain, the aforesaid judgement of the Supreme Court should constitute an important development in order to determine the rules governing the burden of proof in those claims derived from transactions involving the use of credit cards in particular points of sale.

II.1. Facts of the case

The plaintiff, a German entity acting as an issuer of a credit card held by the defendant, claims certain sums resulting from several transactions of the supply of fuel against the defendant. In order to support its claim, the plaintiff provides evidence proceeding from its own registers, but not confirmed by any invoice or receipt issued by the traders adhered to the system.

Although the claim was initially dismissed by the competent Judge, the Provincial Court subsequently delivered judgement in favour of the plaintiff. Nevertheless, the defendant appealed against such decision and, finally, the Supreme Court held that the previous judgement of the Provincial Court had contravened Article 1.214 of the Spanish Civil Code, and ruled in favour of the defendant, which became discharged of the obligations previously imposed thereon by the Provincial Court.

II.2. Legal Grounds

According to what has been stated in section I habove, the Supreme Court refers to the Legal Grounds of its Judgement to the absence of specific regulations on credit cards under Spanish Law, and to the possibility of turning to the Recommendations of the European Union (see Section I above herein) to clarify the rights and obligations of the parties concerning the use of these payment methods.

Pursuant to such Recommendations, the Court states the necessity for the issuers of credit cards to have adequate and detailed registers providing enough evidence of the transactions carried out by means of such payment method.

This evidence could be reached in different manners, depending on the grade of control to be applied to each type of card:

In certain cases, the holder might be obliged to provide his/her own identification and proceed to the signature of the document in which the transaction has been recorded, a copy of which will be sent to the issuer.

In the event of transactions of a very reduced volume and cost, the insertion of the credit card in the corresponding dispensing machine shall be sufficient.

There is also the possibility (as it occurs in the case being judged by the Court) of requiring, apart from the presentation or insertion of the credit card, as applicable, the use of the Personal Identification Number (PIN). By means of this particular system, used in the relevant case, both the issuer and the trader adhered to the system will obtain enough evidence on the transactions carried out using each credit card, and, in the event that any of the sums due as a result of those transactions are not paid, the issuer could claim such sums against the holder not meeting his/her obligations, by supporting said claim with the evidence obtained by both the traders and itself.

However, in the case being judged by the Supreme Court, the plaintiff only provides evidence from its own records, but does not confirm such evidence with any documentation from the traders subscribed to the system.

According to the Spanish Supreme Court, such lack of confirmation would contravene the Commission Recommendation 88/590/EEC, as well as the previous decisions of the Claims Division of the Bank of Spain and the Code of Banking Practices of the European Bankers Association.

Without prejudice to this, even in the case of those rules not being considered, the mere application of Article 1.214 Spanish Civil Code, on the burden of proof, would impose a burden upon the issuer of obtaining further evidence in order to support its claim.

1 "Debit cards": they confer a right of disposal on the positive balance of a certain account only to the limit of said balance (i.e. they do not confer any right to obtain credit from the issuer once the account is off-balance)

2 Although there are significant differences between each of these three categories, to the effects herein they will all be referred to as "credit cards", since the purpose of this article is to provide the reader with a general guide of the treatment of this subject under Spanish Law, instead of carrying out an in-depth analysis of the legal implications of the use of each of these three types of instruments.

3 This will not apply to "debit cards".

4 It should be noted that there are other possible structures entailing the participation of four parties (issuer-manager-holder-trader; e.g. Visa credit card managed by a particular Spanish Bank), two parties (issuer-holder; e.g. in the case of some company-specific cards), etc.

5 In this regard, Judgements of the Provincial Court of Valencia of April 26, 1993 and February 20, 1995.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.