The Friendly Fraud? A Japanese Ruling on Using a Credit Card with Permission

Japanese Attorney at Law - Bengoshi L.L.

• 5 min read
The Friendly Fraud? A Japanese Ruling on Using a Credit Card with Permission

Imagine a common scenario: a friend hands you their credit card and asks you to pick up something for them at the store. You go to the checkout, present your friend's card, and sign their name on the receipt. You've acted with your friend's full permission and they intend to pay the bill. Have you committed a crime? In the eyes of Japanese law, the surprising answer is yes.

This question was the subject of a landmark decision by the Supreme Court of Japan on February 9, 2004. The case, involving a man who used an acquaintance's credit card to buy gasoline, established a clear and strict principle: using another person's credit card by impersonating them constitutes the crime of fraud against the merchant, and the cardholder's private permission is no defense. The ruling delves into the complex, three-party nature of credit card transactions and clarifies what it means to "deceive" a merchant at the point of sale.

The Tripartite World of Credit Card Transactions

To understand the Court's logic, it's essential to recognize the three-party relationship that underpins every credit card transaction:

  1. The Cardholder: The individual to whom the card is issued.
  2. The Merchant: The store or service provider that accepts the card for payment.
  3. The Card Issuer: The bank or credit card company that guarantees payment to the merchant and bills the cardholder.

These relationships are governed by contracts. The cardholder agreement typically states that the card is non-transferable and for the use of the named cardholder only. The merchant agreement requires the merchant to take reasonable steps to verify that the person using the card is the authorized cardholder. It is this contractual framework that sets the stage for the crime of fraud.

The Facts of the Case: The Ambiguous Hand-off

The defendant in the case came into possession of a credit card belonging to a man named A. The exact circumstances of how he obtained the card were unclear, but the court acknowledged the possibility that A had voluntarily given the card to a third party, C, who in turn had given it to the defendant.

The defendant then took the card to a gas station, a participating merchant. He presented A's credit card to the employee, B, and pretended to be A to purchase gasoline. The gas station had a policy of not accepting credit card payments from anyone other than the person named on the card. The employee, deceived into believing the defendant was the legitimate cardholder A, provided him with gasoline worth 11,748 yen.

The defendant was charged with and convicted of fraud against the merchant (the gas station). He appealed, arguing that since he may have had the cardholder's permission, there was no criminal intent.

The central legal question was whether the defendant's act constituted fraud. The prevailing legal theory in Japan, which this case solidified at the Supreme Court level, is that the crime is a 1st-paragraph fraud (fraud for property) committed against the merchant.

  • The Deception: The deception occurs when the user presents the card to the merchant. This act is an implicit representation that they are the person named on the card and have the rightful authority to use it. This representation is false. The user is deceiving the merchant about their identity and their authority, which is a key condition of the merchant's agreement with the card issuer.
  • The Harm: The merchant, relying on this deception, is induced to hand over property—in this case, gasoline. This delivery of property, based on a mistaken belief caused by the user's deception, is the harm that completes the crime of fraud.

The Supreme Court upheld the defendant's fraud conviction. Its most significant contribution was to address the issue of the cardholder's consent directly and definitively.

The Court reasoned that under the facts, the defendant had clearly "impersonated the cardholder... [and] pretended to have the rightful authority to use the said card when he did not". This was sufficient to establish the crime.

Then, in a crucial passage, the Court considered the defendant's primary argument and dismissed it entirely:

"Hypothetically, even if there were circumstances where the defendant had been permitted by the cardholder... to use the said card, and had mistakenly believed that the payment... would be settled by the cardholder according to the member agreement, the establishment of the crime of fraud in this case would not be affected."

This statement established a clear, bright-line rule. The crime of fraud in this context is committed against the merchant at the point of sale. The deception is the impersonation of the cardholder, which violates the established rules of the credit card system that the merchant is bound to uphold. A private arrangement or permission between the cardholder and the user is legally irrelevant to the public act of deception committed against the merchant.

Analysis: A Crime Protecting the System, Not Just the Merchant?

The Supreme Court's ruling, while providing legal clarity, has been the subject of significant scholarly analysis and critique. The main issue is that the legal construction seems to diverge from the economic reality in cases where the cardholder has given permission and ultimately pays the bill.

In such a "friendly fraud" scenario, the merchant suffers no financial loss, as they are paid by the card issuer. The card issuer suffers no loss, as they are reimbursed by the cardholder who gave permission. With no one out of pocket, who is the real victim?

The commentary on the case suggests that by punishing this act as fraud against the merchant, the Court is, in effect, using the fraud statute to protect the integrity and "safety of the credit card system" itself. The harm is not to the individual merchant's wallet, but to the system of trust and the contractual rules that underpin the entire credit card industry. This is theoretically controversial because it uses a crime designed to protect individual property (the merchant's goods) to achieve the broader policy goal of protecting a social interest (the payment system's integrity).

Conclusion: A Strict Rule for a Modern Economy

The 2004 Supreme Court decision provides a clear and strict rule for credit card use in Japan. It authoritatively establishes that using another person's credit card by impersonating them is fraud against the merchant, and that the cardholder's consent is not a valid legal defense to this charge.

The ruling reflects a strong judicial policy choice to prioritize the integrity and security of the standardized credit card payment system over private, informal arrangements. In the Court's view, the rules of that system—specifically, that the card is for the exclusive use of the named cardholder—are not mere contractual suggestions but are fundamental conditions of the transaction. Deceiving a merchant about one's compliance with this fundamental rule is a criminal act. The decision sends an unambiguous message: in Japan, a credit card is not a negotiable instrument to be freely shared, and doing so by impersonating the cardholder crosses the line into criminal fraud.