Case Summary:
Credit card company brought adversary proceeding against debtors, contending that credit card debt was nondischargeable under 11 U.S.C. § 523(a)(2).  Court rejected assumption of the risk approach to credit card debt, the implied representation theory, and the totality of the circumstances test.  Instead, court found that the relevant inquiry focuses upon common law of fraud, citing Field v. Mans, 516 U.S. 59, 116 S. Ct. 437, 133 L. Ed. 2d 351 (1995).  Under common law of fraud, a promise of future performance is actionable as fraud if, at the time the statement or representation was made, the debtor never actually intended to honor the statement.

Further, the court found that the absence of face to face contact was irrelevant to the inquiry.  Debtors still make a representation to the creditor by using the card, given the broad meaning of the term “representation.”  That representation, however, is only actionable if the debtors did not intend to honor the promise to pay.  Intent is based upon a subjective standard, not an objective reasonable person test.  Under this test, the debtors lacked an intent to deceive.  Furthermore, the creditor failed to demonstrate justifiable reliance upon any misrepresentations made by the debtors. 

Statue/Rule References:
11 U.S.C. § 523(a)(2)(A) -- Nondischargeability - Fraud

Key Terms:
Fraud -- Credit Cards