The case concerned P Kenneth Huggins Jr, in whose name credit cards had been taken out with Citibank, Capital One Services Inc. and Premier Bankcard Inc, by an unknown third party. Huggins had no knowledge that the credit cards existed until the bills began to arrive, and his credit rating went dramatically downhill.
Huggins launched an action in the District Court against the Banks, alleging that they were negligent in:
- issuing the cards without verifying the identity of the applicant;
- not having policies to verify the identity of applicants;
- having policies that allowed credit cards to be issued without verifying identity; and
- trying to collect the resulting debt from Huggins.
The Banks argued that the case should be dismissed because they had no duty to guard against fraud on someone who was not their customer. Huggins argued that they did – stating, that "the Banks have a duty to protect potential victims of identity theft from imposter fraud."
In effect this argument introduced a new form of negligence into the legal system, and the District Court referred the matter to the Supreme Court, asking, "Does South Carolina recognize the tort of negligent enablement of imposter fraud"?
The Supreme Court said no, explaining that a duty to take care arises from a relationship between the injured party and the person committing the injury.
It stated:
"The relationship, if any, between credit card issuers and potential victims of identity theft is far too attenuated to rise to the level of a duty between them. Even though it is foreseeable that injury may arise by the negligent issuance of a credit card, foreseeability alone does not give rise to a duty."
The Court expressed its concern about the increase in identity theft in the US – up 79% in the last year, according to a recent Gartner report – but concluded that the matter would be better dealt with by legislation as state and national governments are "better equipped to assess and address the impact of credit card fraud on victims and financial institutions alike".
