Banking Board of Ecuador

RESOLUTION No. JB-2015-3371

THE BANKING BOARD

CONSIDERING:

THAT the second paragraph of the Third Transitional Provision of the Organic Code of Monetary and Financial Law determines that the Banking Board will continue to act until it resolves all claims, appeals, and other administrative procedures it was handling on the date of entry into force of that Code, within a period of one hundred and eighty days, extendable at the discretion of the Monetary and Financial Policy and Regulation Board;

THAT by communication received by the Superintendence on February 26, 2014, engineer Karla V. Jaramillo filed a claim against Diners Club del Ecuador S.A., regarding charges she claims not to have made, amounting to $1,754.68, in the following terms:

"(...) I want to report to you the arbitrariness and mistake that the DISCOVER card (...) issued by DINERS CLUB (...) respectively, the background is that (sic) an unidentified person stole my wallet (containing personal documents and credit cards) at my workplace (...), on Friday (sic) January 17, 2014 at approximately 17:40, without me noticing said theft until Monday, January 20, 2014, when I verified that my wallet was not in the office. When I realized this, I called to block my credit cards and requested the detail of the transactions made. (...) I proceeded to approach on January 20 and 21, 2014 in the afternoon, directly to the commercial premises and requested a copy of the invoice and a copy of the voucher (sic) which I attached to verify the signature (...) where I could deduce the following: In most premises, the ID card was not requested, the false signature which does not resemble the one I normally use in my ID card and transactions was not verified, nor did they notice that the person who made the illicit purchases was not the Holder of the documents, (...)";

THAT the Deputy Director of User Attention, through letter No. DNAE-SAU-2014-01489 of March 7, 2014, requested Diners Club del Ecuador S.A. to send the pertinent explanations and defenses;

THAT through letters GN-GCRP-018-14 and DC-AG-14-007 received by the Superintendence on March 18, 2014, signed by Mrs. Luz Amparo Fonnegra C., Head of Customer Service, and Mr. Jorge Coba M., General Auditor of Diners Club del Ecuador S.A., respectively, the entity, after analyzing the claim, considered that since the loss or theft of the plastic card was not reported in a timely manner, the card was in the possession of the cardholder, who is responsible for its use and custody based on what is established in the Discover Credit Card Issuance and Use Contract, and that on March 5, 2014, it resolved to credit the cardholder the amount of US$ 404.32, for the concept of 3 vouchers that were not adequately supported by the merchant, and that this payment would be reflected in the client's statement for the month of March 2014;

THAT through letter No. DNAE-SAU-2014-02600 of April 24, 2014, the Acting Deputy Director of User Attention, resolved the following:

"(...) For the reasons stated, DINERS CLUB S.A. is ordered to reimburse the cardholder the values claimed for the charges with the credit card: DISCOVER No. 6557XXXXXXXX8708, the amount of USD$ 1,350.36 (...), which results from US$1,754.68, minus the value previously credited of US$404.32; said refund will be made within seventy-two hours counted from the date of notification of this letter (...)" (sic);

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THAT by communication received by the Superintendence on May 12, 2014, Diners Club del Ecuador S.A. filed an appeal for reconsideration against letter No. DNAE-SAU-2014-02600 of April 24, 2014;

THAT with letter No. DNAE-SAU-2014-03867 of June 20, 2014, the Acting Deputy Director of User Attention, rejected the appeal for reconsideration and confirmed letter No. DNAE-SAU-2014-02600 of April 24, 2014;

THAT by writing received by the Superintendence of Banks and Insurance on July 7, 2014, Mr. Jorge Moyano Aguilar, Special Representative of Diners Club del Ecuador S.A., with the professional sponsorship of lawyers Manuel Zurita B. and Francisco Pereira, filed an appeal for review before the Banking Board, against letter No. DNAE-SAU-2014-03867 of June 20, 2014, arguing: That there is no breach of contract by Diners Club del Ecuador S.A., so there is no basis to order the return of values, since there is no incorrect procedure in the entire handling of the cardholder's claim; that in this case, all responsibility was shifted to the entity, alleging breach of the Merchant Affiliation Contract, without taking into account that the claimant is responsible for the charges made, for failing to fulfill her obligation to notify the issuer immediately about the theft of her card, but three days after the event occurred, according to the credit card contract signed by Mrs. Karla Vanessa Jaramillo Jaramillo with Diners Club del Ecuador S.A., which is law for the parties, and as provided in the regulations contained in article 13, section III, chapter V, title I, book I of the Compilation of Resolutions of the Superintendence of Banks and Insurance and the Banking Board; and, that in the appeal for reconsideration, given that it is a case analogous to the present one, reference was made to what was resolved by the Banking Board in resolution No. JB-2012-2268, so he considers that what was stated by the "Deputy Director of Customer Service" (sic) has no basis;

THAT with letter No. JB-2014-1815 of July 14, 2014, the Secretary of the Banking Board, accepted the review appeal filed, and with letter No. JB-2014-14-1816, of the same date, informed Mrs. Karla Vanessa Jaramillo Jaramillo of the matter;

THAT article 1, in concordance with articles 180, letters b) and o) of the General Law of Financial System Institutions, mandates the Superintendence of Banks and Insurance, within the scope of its competence, the supervision and control of the financial system, in all of which the protection of public interests is taken into account, as well as requiring that controlled institutions present and adopt the corresponding corrective measures;

THAT in merit of the foregoing, the Banking Board, with the purpose of achieving effective compliance with the provisions emanating from both the control body and the collegiate body, integrated into chapter IV, of title XX, of book I, of the Compilation of Resolutions of the Superintendence of Banks and Insurance and the Banking Board, the procedure for the handling of claims against financial system institutions, always attentive to the protection of public interests as mandated by law, whose article 5 establishes that if the result of the analysis carried out by the Superintendence determines the need for the controlled institution to introduce corrective measures to regularize the situation that motivated the claim, the Superintendent of Banks or his delegate will issue the corresponding disposition. Likewise, if the situation that motivated the claim referred to in the previous paragraph originated in an incorrect procedure of the controlled institution, which caused harm to the claimant, this control body may order the return of the claimed values, granting the legal representative of the entity a period that may not exceed fifteen (15) days from the notification, to send under the precautions of law, the proof of compliance with the order issued. In virtue of this, letter No. DNAE-SAU-2014-02600 of April 24, 2014 was issued, through which it was ordered to the entity to return to the cardholder the values of

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the claimed transactions, which in turn was subject to an appeal for reconsideration, rejected with letter No. DNAE-SAU-2014-03867 of June 20, 2014;

THAT numeral 13.9, of article 13, chapter V "Constitution, functioning and operations of credit card issuing or administering companies and credit card departments of Financial Institutions", title I "On Constitution", book I "General norms for the application of the General Law of Financial System Institutions", of the Compilation of Resolutions of the Superintendence of Banks and Insurance and the Banking Board, determines the conditions related to the loss, theft, or deterioration of the credit card. If any of these cases occur, the cardholder, duly identified by full names, identity or citizenship card number, and card number, must notify the issuer thereof, and the first is not responsible, from that moment on, for the charges made against the card reported as lost or stolen. The notification can be made in writing or by telephone, in which case the magnetic message will constitute means of proof, according to what is provided in article 125 of the Civil Procedure Code. The notification made by telephone must be ratified in writing within a term of 48 hours;

THAT on the other hand, the Civil Code, with reference to obligations in general and of contracts, in article 1453, states: "Obligations arise, either from the real concurrence of the wills of two or more persons, as in contracts or conventions (...)";

THAT in the file, the defense letter GN-G-CRP-018-14 entered in this Superintendence on March 18, 2014, in which the financial institution within its conclusions refers to the "DISCOVER CREDIT CARD ISSUANCE AND USE CONTRACT", celebrated between the cardholder and Diners Club del Ecuador S.A., in whose Eleventh Clause the conditions for cases of theft, robbery, or loss of the card are stipulated, which contains the regulations issued by the Banking Board, described in the previous paragraph, stating that the cardholder is responsible for the use and custody of her credit card, for not having reported loss or theft of the same in a timely manner. In the aforementioned letter, it is recorded that the credit card was blocked as lost on January 20, 2014, at 11:07 and the transactions were made from January 17, 2014 to January 18, 2014, that is, before the hour and date of the card blocking requested by the cardholder;

THAT the entity, regarding the charges made with the Discover Credit Card No. 6557XXXXXXXX8708, as indicated by the Deputy Directorate of User Attention, did not submit evidence of having analyzed and verified that the signatures on the vouchers sent by the establishments differ notably from the one registered by Miss Karla Vanessa Jaramillo Jaramillo in the citizenship ID card and in the issuance and use credit card contract, signed between the claimant and the issuer; in addition to pointing out that under the signatures recorded in these charge notes it is expressed as follows: "THE ESTABLISHMENT CERTIFIES THAT THE CLIENT'S SIGNATURE IS AUTHENTIC";

THAT Diners Club del Ecuador S.A. Financial Society, should have observed that in the eight establishments involved: ALMACÉN GRAN MACAU, CALZADO ROY SPORT, BÉSAME, POLLOS GUS VILLAFLORA, VICTORIA PINK, ZAHIDT JEAN’S, AVANTI and PA’NIÑOS, the procedure for a safe sale was not applied, since despite having requested the ID card in some establishments, as mentioned in the report issued by the entity, and not having been delivered, the transactions were carried out, failing to comply with what is provided in numeral 15.2 of article 15, chapter V, title I, book I of the Compilation, ibidem, regulation in force on the date of the claim, which states that institutions authorized to issue or administer credit, payment, or affinity cards, must sign written contracts with affiliated establishments, in which it will be stipulated the obligation of the

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establishment to issue the charge note and to verify that the signature and rubric that the cardholder signs is the same as that on the back of the card; and, in case of doubt, the establishment will require the identification document and record the identity card number or passport number on the receipt;

THAT although, according to the file, the claimant communicated the theft of her card after the claimed charges were made, it should be noted that said charges are backed by charge notes whose signatures recorded thereon have not been recognized as hers by the cardholder, since at first glance they differ notably from the one recorded in her citizenship ID card and in the issuance and use contract signed by her with the issuing entity. Therefore, Diners Club del Ecuador S.A., Financial Society, prior to making payments to affiliated establishments, should have fulfilled its obligation to verify that these merchants have in turn complied with what is provided in the aforementioned article 15, relative to the verifications and precautions pertinent in the claimed transactions, to base on its contractual powers, abstain from paying the disputed charges; this does not mean that the control body is adjudicating on the legitimacy of the signatures, but observing Diners Club del Ecuador S.A., Financial Society, as an institution subject to its supervision and control, that for the provision of a financial product, such as consumption through credit cards, it adjusts and complies with what is provided in the current regulations, based on the contractual bond agreed upon with both cardholders and affiliated establishments;

THAT the cardholder assumes contractual responsibilities, as does the credit card issuer, so the argument raised by the appellant regarding the client's lack of custody and her contractual obligation to the entity, without mentioning any security mechanism established to mitigate this type of transactions, does not exempt him from his responsibility regarding the securities to prevent establishments with which he signs affiliation contracts from having and complying with safe sales policies, so that the charge notes or vouchers backing the charges reflect legitimate transactions. Therefore, Diners Club del Ecuador S.A. Financial Society, failed to fulfill its responsibility to analyze and verify that the merchants or establishments involved in the claimed transactions had complied with the obligation to verify the identity of the cardholder, confronting the signature that appears there with the one stamped at the time of the transaction and this in turn corresponds to the identification document delivered by the client, ensuring furthermore that the card does not present abnormalities, according to what is provided in the current regulations;

THAT in addition to clarifying that the non-observance by the establishments involved regarding the verification they should have carried out prior to the claimed transactions, makes them co-responsible for the breach indicated, based on the commercial affiliation contract, which obliges to instruct employees that the cardholder signs the payment voucher in their presence, not to accept pre-signed payment vouchers and to confront the signature that appears there with the one stamped at the time of the transaction and this in turn corresponds to the identification document delivered by the client. On the other hand, the financial entity has not documented whether the client indeed made such transactions since her signature is not the one registered in the consumption vouchers, there being a notable disagreement, which were presumably made by third parties;

THAT on the other hand, what was indicated by the Acting Deputy Director of User Attention and Education, in the appealed letter, is reiterated, to the effect that the claim resolved through resolution No. JB-2012-2268 cited again by the appellant, is not analogous to this one;

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THAT for the reasons stated, in this case the premise of article 5 of chapter IV "Procedure for the handling of claims against financial system institutions", title XX "On the Superintendence of Banks and Insurance", book I "General norms for the application of the General Law of Financial System Institutions" of the Compilation of Resolutions of the Superintendence of Banks and Insurance and the Banking Board has been fulfilled, by having determined an incorrect procedure on the part of Diners Club del Ecuador S.A., Financial Society, specified in the preceding considerations, so it was appropriate for this control body to have ordered the refund of the values claimed by Miss Karla Vanessa Jaramillo Jaramillo;

THAT the National Legal Intendancy, through memorandum INJ-DNJ-SAL-2014-1018 of December 16, 2014, recommended to the Banking Board to reject the claim contained in the appeal filed by the Special Representative of Diners Club del Ecuador S.A. Financial Society; and,

IN exercise of its legal powers,

RESOLVES:

SINGLE ARTICLE.- REJECT the claim contained in the review appeal filed by Mr. Jorge Moyano Aguilar, Special Representative of Diners Club del Ecuador S.A. Financial Society; and, consequently, CONFIRM the administrative act contained in letter No. DNAE-SAU-2014-03867 of June 20, 2014, in which, the Deputy Directorate of User Attention rejected the appeal for reconsideration filed and ratified the administrative act contained in letter No. DNAE-SAU-2014-02600 of April 24, 2014, with which it ordered the entity "(...) to reimburse the (sic) cardholder the values claimed for the charges with the credit card: DISCOVER No. 6557XXXXXXXX8708, the amount of USD$ 1,350.36 (...), which results from US$1,754.68, minus the value previously credited of US$404.32;" (sic).

NOTIFY.- Given at the Superintendence of Banks and Insurance, in Quito, Metropolitan District, on the twenty-second of April of the two thousand fifteen.

Econ. Rodrigo Landeta Parra GENERAL INTENDANT (S) PRESIDENT OF THE BANKING BOARD SESSION (E)

I CERTIFY.- Quito, Metropolitan District, on the twenty-second of April of the two thousand fifteen.

Lcdo. Pablo Cobo Luna SECRETARY OF THE BANKING BOARD