On The Collateral Obligation Of The Credit Card Service Operators

The rapid growth of credit card business has changed people’s way of life and, at the same time triggered a lot of legal issues, the solution of which calls for the studying, interpretation and updating of the existing related legislation. This thesis is focused on the study on the collateral obligation of the part of credit card service operators, the correct understanding of which is important to the legal theorists and practitioners. This thesis addresses the issue from civil legal relationship perspective and defines the above obligation under such framework.The related legal relationship reflects both the rights and obligations in the process of credit card application, use and cancellation, which commences when the credit card service contract is established and is terminated upon its cancellation. It is in essence a legal contract between the credit card service operator and the user. The collateral obligation on the part of credit card service operator refers to the contractual obligation of protection, notification and secrecy on the part of the credit card service provide in the process of credit card application, use and cancellation based on the principle of honesty and good faith.The obligation of protection refers to the credit card operator’s obligation to ensure that credit card user is not subject to personal injury or financial damage in the cause of credit card application, use and cancellation. The credit card service operator shall ensure the safety of fund in the credit card, the safety of business premises and data integrity relating to the credit card. Such obligation may be determined by service contract, legal definition or commercial usage. The obligation of notification on the part of the credit card service operator to describe, notify and inform the credit card user as to the credit card service contract fee, service methods, service content, amount in the credit card and other information concerning the credit card. As a collateral obligation under contract law, it is different from information disclosure obligation under the financial law, which is a part of financial market management law. The credit card service operator has notification obligation as to the description, notification and reminding of contract terms, the way to use the product, service risk and related prevention techniques and any changes to the credit card account. The notification may be oral, in writing or via electronic message. To discharge the obligation, the reasonable person test is applied regarding the determination of timely, proactive, objective and full notification. There are certain exceptions in case of specific group of customers with specialized knowledge and experience, customer’s explicit refusal to notification and customer’s provision of false contact and address, when the notification obligation is exempted. The secrecy obligation on the part of the credit card service operator requires the provider to keep secret the information concerning the credit card user’s account, credit card transaction and other related information. As a service operator, the credit card service operator has the obligation toward the service user as to the keeping secret of the latter’s account, transaction and other related information. He shall take necessary measures to keep the obtained information from leaking out and create a transaction environment adequate to satisfy the secrecy requirements. The practical measures include measures adopted to prevent data leaking, policies and procedures concerning the legitimate purposes, application scope and reporting of data accession and application. Of course, when required by law, under explicit consumer agreement and in the public interest, the secrecy obligation may be exempted.The breach of collateral obligation is in fact a breach of contract. The onus of proof of due obligation discharge is on the credit card service operator, who shall prove that he has committed no negligence so as to be exempted from any duty resulting from contract breach when the customer’s interest has been compromised. To establish the breaching of contract on the part of the credit card service operator, the four conditions of action in breach of collateral obligation, damage sustained by the credit card user, the causal link between the above two and the negligence of the credit card service provider shall all be satisfied. The credit card service operator may be required to provide compensation, specific performance and /or other legal remedies due to specific breaching activity. The type(s)of liability the credit card service operator is liable to vary with the type of the collateral obligation(s) concerned.