Even though Huggins was a victim of ID theft, he received no sympathy from banks or the collection agencies. Under the Consumer Credit Protection Act, an individual cannot be held liable for charges incurred on a credit card for which the individual did not apply and did not receive. Therefore, the banks would ultimately be forced to absorb the bad debt, but, in the meantime, that did not stop collection agencies from trying to collect the money from Huggins.

Huggins spent countless hours writing multiple letters, making and documenting phone calls, leaving and returning messages, sending certified mail, and doing anything he could to right a wrong he never committed.

For his troubles, Huggins sued the banks for negligent enablement of imposter fraud, alleging they were negligent for issuing the credit cards without investigation, verification, or corroboration of the imposter. Further, he claimed the banks were negligent in attempting to collect the debt from Huggins, an innocent victim of a crime made possible by the banks’ lack of due diligence.

The banks—also victims of the fraud—asked the court to dismiss the case because Huggins was not their customer and, therefore, they had no legal duty to protect him. Huggins disagreed, arguing that banks have a duty to protect potential victims of identity theft from imposter fraud.

To legally establish a claim for negligence, a plaintiff must prove there is a legal duty of care owed by the defendant to the plaintiff and that there was a breach of that duty by negligent act or omission. In a negligence action, the court must determine, as a matter of law, whether the defendant owed a duty of care to the plaintiff. If there is no duty, there should be no action.

You be the judge.

DECISION:

“We are greatly concerned about the rampant growth of identity theft and financial fraud in this country. Moreover, we are certain that some identity theft could be prevented if credit card issuers carefully scrutinized credit card applications.”

Having said that, the court ruled in favor of the banks, citing that negligence liability does not attach unless the parties have a relationship recognized by law and “South Carolina does not recognize the tort of negligent enablement of imposter fraud.”

Adding an editorial note, the court also pointed out “that various state and national legislation provides at least some remedy for victims of credit card fraud…. While these regulations may not fully compensate victims of identity theft for all of their injury, we conclude the legislative arena is better equipped to assess and address the impact of credit card fraud on victims and financial institutions alike.”

Who Pays for Identity Fraud? The Saturday Evening Post