A loan taken out with stolen identity and a demand for repayment... Law: “Identity verification obligation should have been observed”

A child borrows 35 million won in the name of his or her parents.
Credit card company: “Parents are contract holders… repay”
Court: “Mobile phone authentication does not guarantee reliability”

The court ruled that if a loan was made under a stolen name, the financial company that did not properly verify identity was responsible.

On the 15th of last month, the Western Branch of the Busan District Court ruled that the plaintiff lost in a lawsuit filed by a credit card company against Mr. A, a man in his 60s, over credit card usage charges.

Mr. A collapsed while working in 2022 and was taken to the hospital, but did not fully regain consciousness and was diagnosed with severe disability.

Afterwards, the children began managing Mr. A's cell phone for industrial accident insurance purposes, but a problem arose when one of the children received an unauthorized loan of approximately 35 million won in Mr. A's name.

The child issued a card and received a loan in Mr. A's name, and when this fact was discovered, he wrote an IOU to repay the loan to Mr. A and his wife.

However, the credit card company sent a reminder to Mr. A to repay the loan. Even if the child's identity was stolen, the loan amount was transferred to an account in Mr. A's name through an identity verification process through a mobile phone, so Mr. A should be regarded as a loan holder pursuant to Article 7, Paragraph 2, Item 2 of the Framework Act on Electronic Commerce.

Accordingly, Mr. A's side emphasized that Mr. A was unable to communicate long before the loan contract was executed, and that the deposited loan money was also immediately transferred to the child's account.

The court ruled in Mr. A’s favor. The court said, “A contract is established by the agreement of the parties, but considering the defendant’s state of consciousness at the time of the loan, it is recognized that the defendant’s identity was stolen, so the contract was not established.” “Even if Mr. A and his wife allowed their children to use mobile phones, it cannot be seen that they agreed to proceed with the identity verification process or even accepted the consequences arising from it.”

He added, “Authentication through a mobile phone is not a complete means of ensuring reliability and stability,” and added, “It is reasonable to say that the plaintiff did not properly fulfill his obligation to verify his identity.”

Attorney Son Yun-jeong of Daeryun Law Firm, who represented Mr. A, explained, “If a financial institution shifts responsibility for a financial accident to the customer just because it has gone through a formal non-face-to-face real name verification, it could lead to an unfair result that reduces the duty of care regarding identity verification for non-face-to-face transactions.” He added, “We were able to obtain a dismissal decision by emphasizing that the credit card company did not properly carry out strengthened identity verification procedures such as video calls and ID verification.”

Digital Content Team

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Loan made with identity theft, pressure to repay... Law “Identity verification obligation should have been observed” (Shortcut)