Amendment of the Law on Form of Contracts between Debit Card and Credit Card Issuers and Card Holders
As is generally known, one of the fundamental principles of Turkish Civil Law is the “freedom of contracts” principle. “Freedom of form” is a reflection of the freedom of contracts principle. This definition is expressly set out in Article 12 of the Code of Obligations, titled, “Form of Contracts – General Rule” with the following wording: “The validity of contracts does not depend on any form requirement, unless otherwise is provided with the law.” In other words, unless the law sets a form requirement, a contract can be made orally no matter how valuable its subject matter is. Furthermore, the validity of some types of contracts require a specific form, such as “written form,” “qualified written form,” or “notarized form.”
Some of the contract types that used to require specific forms were the contracts between card holders and debit card and credit card issuers. However, this situation has changed with the Law on Amending Some Laws and Decree Laws Changes on Some Laws and Decree Laws (Law No. 7247).
The Law Before the Law on Form of Contracts between Debit Card and Credit Card Issuers and Card Holders (Law No. 7247) Came Into Force
The rule on form of contracts between card holders and debit card and credit card issuers can be found in Article 24, paragraph 1, titled, “Terms of Contract” under the Law on Debit Cards and Credit Cards (Law No. 5464). However, the provision as to form requirement has changed with Law No. 7247. The provision must conclude a valid contract before the amendment, below, is presented.
“The relations between card issuers and card holders shall be constituted with a contract written with a minimum of twelve points and dark black letters according to this Law and other relevant legislation. A duplicate of such contract shall be given to the card holder and, if present, to the guarantor. Detailed information shall be provided to the card holder on covenants of the contract and card usage.”
The Law after the Law on Form of Contracts between Debit Card and Credit Card Issuers and Card Holders (Law No. 7247) Came Into Force
The law in Article 24, which is mentioned above regarding form of contracts between card holders and debit card and credit card issuers, was amended with the Law on Amending Some Laws and Decree Laws Changes in Some Laws and Decree Laws (Law No. 7247) which came into force on June 26, 2020. The 2nd sentence of Article 24, paragraph 1 of Law No. 5464 was not changed, but the first sentence was changed to the sentence, below.
“The relation between card issuers and card holders shall either be constituted with a contract written with a minimum of twelve points and dark black letters; or by using remote communication tools if the contract is a distance contract; or no matter that it may be a distance contract or not, with a method that the Board has set to replace the written form with a method using informatics or an electronic communication device that allows the verification of the customer identity, and the relevant procedures and principles that will apply to these contracts will be determined by the Board.”
The Effects of New Law on the Form of Contracts between Debit Card and Credit Card Issuers and Card Holders
At first glance, the effect of this regulation seems clear. Before the amendment brought by Law No. 7247 came into effect, Article 13, and following relevant regulations of the Turkish Code of Obligations – for instance, the requirement for a contract to include the signature of the obligors – were validity requirements for contracts between debit card and credit card issuers and card holders; however, a written form is no longer required.
The rationale of this amendment is stated, below.
“The Article regulates the form of contracts between card issuers and card holders under Law No. 5464. Within this scope, the contracts are expected to be constituted in written form, or distantly, through remote communication tools, or distantly or not, carried out by means of a method that is established by the Board to replace the written form, with a method using informatics or an electronic communication device that allows the verification of the customer identity, and the relevant procedures and principles that will apply to these contracts will be determined by the Board. The new rule paves the way for distant contractual relationships regarding credit cards between banks and customers through remote communication tools and to use other methods compatible with up-to-date technology, which are established by the Board to replace the written form without using physical documents and wet-ink signatures.”
In a nutshell, this regulation aims to promote carrying out distance contracts.
The question that should be raised in this context is: Are guarantees secured with these contracts within the scope of this form requirement? The question can be formulated in another way: Have the form requirements foreseen in the law regarding guarantee agreements also lost their validity? Actually, as is generally known, for instance, almost in all credit card contracts, the credit card issuer makes use of various collateral opportunities, such as surety, pledge, and transfer of receivables in order to secure the card holder’s payment of the loan. These guarantee contracts are often subject to special form requirements. If we continue to provide real-life examples of guarantee agreements, suretyship is subject to a notarized form (TCO Art. 583), and transfer of receivable is subject to a written form requirement (TCC Art. 955, TCO Art. 184). If we revisit the question, will the new regulation in Article 24, paragraph (f) of Law No. 5464 apply to the guarantee agreements that go hand-in-hand with the contracts at issue?
One can reasonably think that the rationale of the legislator is to rid itself of the requirement to bring parties together; however, from our point of view, the response given to this question is negative. This is because guarantee agreements and, also, suretyship agreements are severable from the underlying contracts even though they usually appear within the provisions of the underlying contracts. These agreements are not the objective essential element of the underlying contracts, and unless parties agreed otherwise, the validity of an underlying contract is separate and independent from the validity of a guarantee agreement. As a result, the agreements between debit card and credit card issuers and card holders will be valid without the presence of a guarantee agreement between the parties. In summary, the amendment of Law No. 5464 does not apply to guarantee agreements. As a matter of fact, the legislator merely addressed the underlying contract, and not the guarantee agreements.
Even though the written form requirement for contracts between debit card and credit card issuers and card holders was abolished by Law No. 7247 coming into force, from our point of view, this regulation does not affect the validity of guarantee agreements; the validity of those agreements are subject to the form requirement that is set by the laws specifically designated for guarantee agreements.