How to fight credit card companies who are suing you

6 Tips to Save Using the Most Popular Food Delivery Apps

If you leave your credit card balance unpaid, your credit card company may sue you to collect it. A lawsuit isn’t guaranteed but, should one occur, you don’t simply have to accept a court judgment against you and submit to wage garnishment, bank levies or any other aggressive collection method the credit card company can use after winning a lawsuit. You have the option to fight the credit card company in court — even if you legitimately owe the debt.

Filing an Answer

When a credit card company sues you, it serves you with a summons and complaint. The summons contains the details of the case and the date of the lawsuit hearing, while the complaint informs you of the plaintiff’s reason for filing the suit. In the case of a debt collection suit, the complaint details the amount the credit card company claims that you owe. If you intend to defend yourself in court, you must answer the summons and complaint and provide both the court and the credit card company with a copy of your answer. The answer notes that you intend to defend yourself in court and notifies the credit card company of the defense you intend to use. If an answer form is not included in your summons and complaint, you can pick one up at your county courthouse.

Defenses

You must have a defense against the lawsuit. If you do not have a defense, the judge will decide the case in favor of the credit card company. If you do not owe the debt, you can use this fact as a defense. You also can use an expired statute of limitations as a defense in court. Each state gives creditors a limited period of time to file suit against residents in that particular state. If this time period has passed and the creditor files a lawsuit anyway, informing the court of the expired statute of limitations will result in the judge dismissing the creditor’s suit. Although a lawyer can be beneficial in helping you defend your case, the court does not require you to have legal counsel when defending yourself against a debt collection lawsuit.

Burden of Proof

When you present your defense to the court, the burden of proof lies with the creditor. For example, if you claim that the debt does not belong to you, the creditor must provide documentation proving to the court that the debt is, in fact, yours. Credit card companies frequently sell unpaid accounts to debt collectors, which then sue consumers. While debt collectors purchase the accounts, they do not always have the supporting documentation necessary to prove the debtor actually owes the debt should the debtor defend himself in court. A collection agency that knows it cannot prove its case will often drop the lawsuit if the debtor files an answer and mounts a defense.

Considerations

If you do not file an answer with the court and do not mount a defense against a credit card lawsuit, the credit card company or collection agency that filed a lawsuit against you will win the suit automatically. The court then grants the plaintiff a default judgment. Even if you legitimately owe the debt, you can still demand that the plaintiff prove that you owe the debt in court — lowering your chances of facing a judgment over your unpaid account balance.

• LawHelp: How to Answer a Lawsuit for Debt Collection; February 2007
• MSN Money: Is There a Statute of Limitations on Debt?; Liz Pulliam Weston; July 2010
• Neighborhood Economic Development Advocacy Project: The Basics of Defending Creditor Lawsuits
• Cornell University Law School: Federal Rules of Civil Procedure — Default Judgment

Ciele Edwards holds a Bachelor of Arts in English and has been a consumer advocate and credit specialist for more than 10 years. She currently works in the real-estate industry as a consumer credit and debt specialist. Edwards has experience working with collections, liens, judgments, bankruptcies, loans and credit law.

Last updated on December 14, 2017

Last updated Aug. 30, 2017.

You’ve received a summons and complaint, your credit card company has filed a lawsuit. What to do now? Should you file for bankruptcy?

First, understand that credit card debt is a type of unsecured debt, meaning that if you can’t make payments, your credit card company cannot come after your personal property right away. In order to come after your assets, they must first sue and obtain a judgment, which is a court document stating a valid debt is owed and which gives the creditor the right to pursue assets of the debtor to satisfy it.

The extent to which a judgment creditor can pursue a consumer is a function of state law, with each state granting creditors slightly different options for pursuing judgments. Read on for what happens if a credit card company sues you, and how bankruptcy and debt settlement options may help.

When a Credit Card Company Sues You, They Want a Judgment

Why is my credit card company suing me? Because they want a judgment.

If the debt owed is valid (which it usually is), it is likely that the credit card company will be able to obtain a judgment for the full amount that is past due — although there are credit card lawsuit defenses that can be raised.

This is not because the credit card companies have a team of star litigators on the payroll. No, it’s because debtors usually do nothing when faced with a lawsuit. It is a rare debtor that will file an answer to a complaint to dispute even a valid debt. This allows the credit card company to win the lawsuit by default.

Why is this important?

As mentioned above, the judgment is the court’s determination that the debt is due. In most states, obtaining this validation of the debt from the court system is a condition that must be met before the credit card company can attempt to change its position from unsecured creditor to secured creditor. In other words, they sue to obtain a judgment, which allows them to come after your property or income in satisfaction of the debt.

The judgment will be recorded in the county where you live. From there, the credit card company can go forward with a bank levy or wage garnishment. Your credit card company may even put a lien on your real estate.

What will bankruptcy do in a credit card lawsuit?

Bankruptcy (either Chapter 7 or Chapter 13) puts a stop to any collection proceedings, including lawsuits, through the power of the automatic stay. Your creditors will be notified of the stay, so any wage garnishments or foreclosure actions also will stop.

Filing for Chapter 7 bankruptcy also can eliminate the personal liability associated with the judgment, which will clear your obligation to pay the debts. However, be aware that once a judgment attaches as a lien on your property, it will be harder to get rid of. For this reason, it is not a good idea to wait too long to act once a collections proceeding has been initiated against you.

You will not be able to sell the property until the lien is paid or removed, and in some cases, the creditor may sell the property to pay the lien. If the property is exempt (e.g., your house or car), that lien can be removed pursuant to 11 U.S.C. Sec. 522(f).

This is not part of the ordinary bankruptcy procedure. While your bankruptcy is open, you must request your attorney to file a Complaint to Avoid Lien, such as this example in California; there is typically an extra charge for such an action.

Should I opt for debt settlement instead?

In some cases, being sued by a credit card company can be a positive thing as you or your attorney can call the firm on the other side of the suit and negotiate a large reduction in the balance you owe. Often, debt settlement negotiation can help the debtor avoid bankruptcy as well as an unpleasant judgment.

However, debt settlement is an industry wrought with scams. Most companies require you go further in default while saving up to pay off creditors. While you save, creditors can take action. There also may be tax consequences associated with debt settlement.

The bottom line is this: if you’ve been sued by a credit card company, call an attorney right away to explore your options. Ignoring the lawsuit will only play into the hands of your creditors — which is exactly what the credit card company is banking on.

sturti / Creative RF / Getty

Debt collectors have the responsibility of collecting on past due accounts, and they have many tactics they can use to do so—including calling, sending letters, listing the debt on your credit report, and suing you. These are tough enough to deal with when the debt is yours, but it’s even worse when it’s not.

The inaccurate debt collection may have resulted from someone opening an account in your name and failing to pay the bill, and sometimes paid debts are accidentally sent to collections. In some cases, unscrupulous debt collectors create fake debts hoping consumers will be frightened into paying without ever questioning whether the debt is real. If you have any doubts about whether a debt belongs to you, it’s important to follow the right steps.

Determine If the Debt Is Yours

Don’t assume that because the collection seems strange and you don’t remember having an account with that creditor that the debt collection isn’t yours. There’s always the possibility that a bill slipped through the cracks or that you simply don’t recognize the name of the original creditor. For example, a loan may have been sold to a different servicer, or, as with retail credit cards, the bank issuing a credit card has a different name than the store you signed up for the credit card with.

Reporting Limit and Statue of Limitations

The amount of effort you put into disputing the debt depends on how much action the debt collector can take against you for the debt based on the credit reporting time limit and the statute of limitations for your state. The credit reporting time limit is the maximum amount of time a debt can be reported to the credit bureaus, and it’s seven years from the last date of delinquency for most accounts. In 2020, for example, debt collectors can’t report debts from 2012. The statute of limitations is the time that a debt is legally enforceable. It’s much less likely that a collector will sue you once a debt is outside the statute of limitations, but in this case, it wouldn’t matter because the debt isn’t yours.  

Dispute the Debt

You have the right to request proof of debts that collection agencies ask you to pay. Once you’ve requested the proof, the debt collector has to stop collection efforts until it can show that you owe the debt and that the collector is within its rights to collect the debt. Until they prove it, you shouldn’t receive any calls, letters, credit bureau updates, or lawsuits.

You can dispute a debt with the debt collector by sending what’s known as a debt validation letter. This letter simply states that you won’t believe the debt is yours and that the debt collector should send proof of the debt to you. Send your letter via certified mail so you’ll have proof of when the letter was sent and received.  

Check Your Credit Report

It’s one thing to suffer credit damage for collection accounts that are yours; it’s unacceptable to have credit problems for collection accounts that don’t belong to you. If debt collectors are contacting you about a debt, there’s a good chance the debt has been reported to the credit bureaus. Get a copy of your credit report from all three major credit bureaus—Experian, TransUnion, Equifax—and verify whether the collection account has been reported. You must check all three because some collection agencies report to all three bureaus while others report to only one or two. If you find a debt, dispute it with the credit bureaus.

Collection accounts can hurt your credit score, keep you from being approved for credit cards and loans, and cause you to pay higher interest rates or security deposits. You have the right to an accurate credit report, which means you can dispute collection accounts that don’t belong to you. Write a letter to each of the credit bureaus that lists the inaccurate debt collection on your credit report. Explain that the account doesn’t belong to you and provide copies of any proof you have that supports your claim.  

Don’t Ignore the Debt

Out of sight, out of mind isn’t necessarily a good strategy for dealing with debt collections, even collections that aren’t yours. If the debt isn’t on your credit report, outside the credit reporting time limit, or outside the statute of limitations, you have less to worry about. Even when all of these are true, you can’t take for granted that the debt collector won’t re-age the debt and add it to your credit report. Or, they may file a lawsuit anyway, hoping you won’t show up to court, and they win an automatic judgment against you.

You can stop a debt collector from calling you with a simple cease and desist letter. In the letter, you only have to request that the debt collector stop contacting you regarding the debt. Once the debt collector receives your letter, they can only contact you once more to let you know what action, if any, the collector will take next. After that, it’s against the law for that collector to contact you about that debt. Send your letter via certified mail.

Asking the debt collector to stop calling you doesn’t stop it from using other collection tactics, like filing a lawsuit or listing the debt on your credit report. It’s best to let the collector know the debt isn’t yours, provide proof of any payments you made, or request validation from the collector.

When Debt Collectors Misbehave

You may be able to sue a collector that continues to collect a debt after you’ve followed all the proper steps for disputing the debt and requesting validation. An attorney experienced in handling debt collection cases will be able to tell you whether you have a valid lawsuit and help you proceed with court filings. You should also get an attorney involved if the collection agency sues you. Even though the debt isn’t yours, you want to have the best legal defense possible.

Get the Consumer Financial Protection Bureau (CFPB) involved if the debt collector or credit bureaus aren’t responding properly. For example, if the debt collector continues to collect from you after failing to respond to your debt validation letter or if the credit bureau continues to list the debt on your credit report after you’ve disputed it. You can submit a complaint to the CFPB website.  

How to react when sued by your credit card company depends on several things.

Aug. 3, 2013 — — Whether the notice comes in the mail, or is delivered to your doorstep, being told that you are being sued for a credit card debt can be terrifying. For many people, the first reaction is to shut down and ignore the situation. “The tragedy…is not that the consumer was sued but that most never respond,” says Steve Rhode, founder of GetOutofDebt.org who is also working on a research project about lawsuits filed over consumer debts.

If a debtor ignores the lawsuit, however, the creditor will get a judgment against the debtor, which in turn will provide the creditor with additional powers to collect the debt, including seizing bank accounts or garnishing wages, in some states. (Note that in this story we are talking about situations where a credit card company itself sues you – not when a debt collector sues you.)

How to react when you are sued by your credit card company depends on a number of things — including, first and foremost, whether you acknowledge that you owe the debt in question.

You Know You Owe

If you know you owe the debt and the amount is correct, there are a few different ways this can unfold.

If you can scrape together some cash – perhaps with a loan from a friend or family member, for example, then one option is to pay or settle the debt immediately. “A reduction in balance owed or beneficial repayment terms are entirely possible outcomes,” says Rhode.

But you must act quickly.

“Once sued for collection, get immediately involved in the solution,” says debt settlement expert Michael Bovee, founder of the Consumer Recovery Network. In his experience, consumers will typically have to come up with 60% – 100% of the amount owed to stop the lawsuit, though smaller settlements are possible in some situations.

If you are able to resolve the debt at this point, you must get written documentation from the creditor acknowledging your payment and stating that the lawsuit will be dropped. This is especially true in cases where you are settling the debt for less than you owe. Otherwise, the creditor may say your settlement was a “payment” and still sue you for the balance.

“Be certain you are agreeing to a settlement that will also result in the dismissal of the lawsuit,” Bovee insists. “Settling quickly means you can avoid a judgment damaging your credit report.”

If you know the amount is correct, but you can’t afford to pay or settle it, it’s a good idea to talk with a bankruptcy attorney to find out whether filing for bankruptcy is your best option for dealing with the debt that you can’t afford. If it turns out that bankruptcy isn’t a good option, the attorney can explain to you what may happen once there is a judgment against you.

There Must Be Some Mistake

What if you don’t believe you owe the amount they are trying to collect? Maybe you disputed a purchase but the creditor refused to correct it. Perhaps you believe you were a victim of fraud. Or maybe your balance has just ballooned with bogus charges. Robert Brennan, a Southern California consumer law attorney, explains:

Look at the amount that is being collected and the amount that is being reported (on credit reports) as delinquent. When accounts go into collections, the collections departments frequently tack on fees, penalties and interest which do not belong there. If you see your $2,500 balance suddenly balloon to $5,000, or higher (not uncommon), write a certified letter to the credit card company asking for a detailed accounting of the penalties, fees and interest, along with a copy of the contract that permits the card company to charge these items for a defaulted account. Sometimes the card company will give you the info; most times they will not. If the card company cannot verify the proper amount of the debt, then it can only credit-report the amounts which it can verify, which is usually the principal-plus-interest at time of default. It may not be a big case, but consumers who fall victim to this type of false credit reporting can probably use the Fair Credit Reporting Act to pressure the card companies to at least lower the demand to the principal-plus-interest at time of default.

Fighting Back

If you think something is amiss – you are being harassed or the amount you owe has been inflated, for example — you may want to talk with a consumer law attorney with experience in credit and collection issues.

William Howard, a Florida consumer protection attorney with Morgan & Morgan points out that in a few states, including Florida and California in particular, there is a “collection harassment law that allows you to sue “Any Person” (including the original creditor or credit card issuer) directly for harassment such as: collecting one penny not owed, collecting fees they are NOT entitled to such as attorney fees or higher interest, too many calls, calling at work, etc.”

Consumer law attorneys usually offer a free or low-cost consultation, and may take the case at no cost to the consumer since the creditor or collection agency will be required to pay their fees if it turns out they are breaking the law.

While a lawsuit for a debt isn’t something anyone wants to have to deal with, try to keep it in perspective, and focus on resolving it one way or another.

“My advice is to not look at the suit as a negative,” says Rhode. “But as a positive opportunity to negotiate with the lender to work out a solution that might be affordable and beneficial to both parties.”

This work is the opinion of the columnist and in no way reflects the opinion of ABC News.

6 Tips to Save Using the Most Popular Food Delivery Apps

If you’ve missed credit card payments, even if it’s been several months, don’t panic. You would probably already know if your credit card company had filed a lawsuit. However, many credit card companies try to avoid the courts to cut costs. A few phone calls to your company and a payment arrangement might be all it takes to get back in good standing.

Receiving a Summons

If your credit card company decides to sue, you’ll receive a summons, or a notice to appear in court, either by mail or by personal messenger. Once you receive the summons, you’ll have about three weeks to respond, though the exact time depends on your state. Receiving a summons can be scary, especially if you’ve never been to court, but you shouldn’t ignore it. If you do, the judge will issue a judgment against you, and you’ll have to pay the entire amount the credit card company says you owe. If you ignore the problem long enough, the court could give your credit card company permission to take money from your paychecks or bank account.

Biding Your Time

If you haven’t received a summons, you’re probably not being sued, though you can call your jurisdiction’s court clerk to be sure. In fact, you can usually miss payments for several months before your credit card company will take you to court. According to the Kiplinger financial website, credit card companies usually wait until your account is more than 90 days past due before pursuing the past due amount. Even at that point, credit card companies often elect to sell your debt to a debt collector instead of taking you to court. You’ll know if your missed payments are getting close to the 90-day mark, because the credit card company will usually call, send letters or email you. If your account goes into collections, you’ll know because the collections company will attempt to contact you.

Handling Collections

If your account has been sent to collections, that doesn’t mean you’ve avoided a lawsuit. If you don’t respond to the collection company’s attempts to contact you or refuse to pay your debt, the collections company could take you to court. To avoid being sued, contact the collections company right away. Most collections companies prefer to settle the debt outside of court to avoid legal fees. If you contact the company and tell the collector what you’re able to pay, you may be able to avoid court and pay off your debt at a rate that you can afford and within a time frame that’s realistic.

Avoiding a Lawsuit

If you’ve missed some credit card payments but you haven’t received a summons from your credit card company, call customer service and ask to speak to a manager. You might be able to work out a payment arrangement that will keep you out of collections and court. Ask your credit card company to lower your rate, let you skip some payments or take a reduced amount as full payment. Dealing with lawyers and bill collectors can be costly and time consuming for your credit card company, so management might be willing to make a deal that’s mutually acceptable.

Minors and Credit Card Debt

If you’re under 18, it’s not legal for you to have a credit card, but if you lied about your age to get one, you might not be responsible for what you charged. Minors aren’t allowed to enter into contracts, and a credit card is a contract. If you’re a minor or are being sued for money you charged as a minor, talk to a lawyer to plan the best legal defense for your suit. However, lying about your age to get a credit card is fraud, which is a crime, so you might face criminal penalties.

• Account Settings
• Log In
• Sign Up

Maria LaMagna

Many companies have chosen not to include mandatory arbitration agreements in their contracts

• Email icon
• Facebook icon
• Twitter icon
• Linkedin icon
• Flipboard icon

Print icon Resize icon

Referenced Symbols

Angry with your credit-card company? Even though many financial institutions have arbitration clauses that prevent you from suing them, surprisingly you can still sue the majority of credit-card companies.

Consumers’ ability to sue financial institutions has been challenged this year, after President Donald Trump killed a proposed rule from the Consumer Financial Protection Bureau that would have stopped financial services companies from putting “mandatory arbitration agreements” in their contracts. The agreements keep consumers from suing companies and force them to settle disputes out of court through arbitration. Companies primarily use them to prevent class-action suits, but they also prevent consumers from suing individually.

And yet despite the companies’ ability to use the clauses, many credit-card companies don’t, according to a new analysis by the credit-card comparison website CreditCards.com.

They studied 30 major credit-card issuers and found that only nine have mandatory arbitration clauses in their contracts. The other 21 either have no mandatory arbitration clause or allow consumers to opt out of it within a defined time period.

include a mandatory

do consumers have

“We ended up being pleasantly surprised that consumers had more ways to avoid these forced arbitration clauses than we expected they would,” said Matt Schulz, a senior industry analyst at CreditCards.com.

The companies’ reluctance to use the clauses may be a matter of public relations, he said.

“It may be an indication of how competitive the credit-card market is,” he said. “They don’t want to introduce terms that are not seen as consumer friendly.”

Bank of America BAC, +0.64% , Chase JPM, +0.87% and Capital One COF, +1.85% , three of the biggest card issuers, have no arbitration clause at all, CreditCards.com found.

The industry faced a turning point on their policies in 2009, Schulz said.

In that year, the Minnesota Attorney General filed a lawsuit against an organization that handles disagreements between credit-card issuers and cardholders.

In response, the organization agreed to stop accepting new cases from financial institutions, cellphone companies and health care organizations.

Later in 2009, the American Arbitration Association, a trade group, announced it would suspend its consumer debt collection practices, after a meeting with a U.S. House subcommittee.

Chase, Bank of America and Capital One all started eliminating arbitration agreements from their contracts and haven’t reinstated them.

“It might be an indicator other large banks either don’t see it as a priority or don’t see it as being worth the effort,” Schulz said.

American Express AXP, +0.84% , Citibank C, -0.40% and Discover DFS, +1.86% are among the institutions that allow consumers to opt out of the clause. But consumers typically only have 30 to 60 days from the time the card is issued to do this, CreditCards.com found.

Barclays BCS, -1.05% and Wells Fargo WFC, +1.37% do include mandatory arbitration clauses, they found.

“Wells Fargo’s goal is to provide customers with the products and services they want and value,” a company spokeswoman said. “If any customer has a concern, we will work hard to make things right by resolving the issue directly so that formal dispute resolution proceedings are unnecessary. If we are unable to resolve an issue directly, we turn to arbitration.”

It’s unlikely that consumers consider their ability to sue when choosing a card, but it’s a factor to consider, Schulz said.

“If you don’t like your card’s terms, don’t be afraid to shop around and possibly even walk away.”

To be sure, there are other ways of solving disputes with companies. Consumers can try to resolve conflicts with the company directly, or file a complaint to the CFPB, through its complaint database.

Many cards that do have mandatory arbitration clauses have exceptions for disputes that are small enough to be handled in small claims court, CreditCards.com found, with the exception of Fifth Third Bank, and Key Bank, for cards besides its Latitude card. Active military servicemembers and their dependents are also exempt from mandatory arbitration clauses under the Military Lending Act, Schulz said.

But consumers have expressed concern about how time-consuming and challenging resolving disputes can be.

Only about 2% of consumers with credit cards said they would consult an attorney or consider formal legal action to resolve a small-dollar dispute, according to a survey the CFPB conducted when researching its anti-arbitration rule. Separately, 89% of consumers said they wanted the right to participate in class-action suits against their banks, when the Philadelphia-based nonprofit Pew Charitable Trusts surveyed about 1,000 consumers in 2016.

Still, a card that comes with a mandatory arbitration clause doesn’t have to be a deal breaker, said Brian Karimzad, the vice president of research at LendingTree, the parent company of the credit-card website CompareCards.com.

He said in many cases, lawsuits — especially class-action lawsuits — are time-consuming, and it can take years for consumers to see a payout from them.

Escalating a complaint through the bank’s management, perhaps with the help of the CFPB, is a good first step instead, he said.

“You’ll probably get a better result than trying to go to court first,” he said.

Customers should be aware of their card’s terms, he said, and if they do have an opt-out option, consumers should do that as soon as they activate their card, he said.

But there are other factors to consider when deciding on a card, including rewards and interest rates.

“Shop for a card that will save you the most money,” he said.

Welcome to the Consumerist Archives

Thanks for visiting Consumerist.com. As of October 2017, Consumerist is no longer producing new content, but feel free to browse through our archives. Here you can find 12 years worth of articles on everything from how to avoid dodgy scams to writing an effective complaint letter. Check out some of our greatest hits below, explore the categories listed on the left-hand side of the page, or head to CR.org for ratings, reviews, and consumer news.

Suing Big Companies In Small Claims Court Is Fun And Easy

1.21.08 3:32 PM EDT By Ben Popken

Taking a big company to small claims court sounds like a big hassle but reader Bill has done it successfully three times. He says the time and effort spent on taking a company to small claims court is far less then how it long it takes to get companies to fix above-average in complexity problems.

Here’s his typical expenditure for a small claims suit: $24 and 45 minutes. The $24 is the cost to file a claim. The 45 minutes includes his total time of driving to and from court to file, as well as the time spent on the phone with the company when they call to settle.

See, in all cases, he hasn’t even had to go to court: the company calls him up the day before the court date and gives him a settlement. It seems they prefer to do that then pay to fly a company representative who isn’t fully versed on all the facts to court. Here’s his true story of how he got what he deserved from Tmobile and Washington Mutual, without breaking a sweat.

Twice I have taken T-Mobile to Small Claims court. Each time I asked for payment of my many hours of time, to have early termination fees waived and to have money refunded to me for equipment that never worked. Each time they have called me and settled for what I was asking. Then I would tell them to apply the settlement to my account. Since I’m a heavy user of my cell phone and I know that changing companies is just another set of headaches, I opt to stay put. Mostly because I know how to fight this monster. In those two cases combined, I have got my $2912.00 back. Settling the case.

Washington Mutual bank had taken overdraft fees of $58.00 even though the check was deposited and they didn’t clear it when they said it was immediately available. I took them to small claims and asked for $2,058.00. $2000 for the impact it caused and for punitive. They called 7 days before the court date and sent me a check, settling the case for exactly what I asked for. I have not had a problem with them since.

It important to note that corporations can’t use an attorney in small claims and they have to send (fly) a representative that is NOT fully versed on the facts. It’s easier to just pay from their point of view. In small claims, they are stripped of their lawyers and the odds are in favor of the consumer. [ed. Depends. In some states, companies can send their lawyers.]

The bigger point that I’m making here is that perhaps to the average consumer this is a lot of hassle. However, if a reasonable person was to take a look at this from a time management point of view, here was my total investment in money and time: $24 to file the small claims, 45 minutes total on each case, that includes driving to the court to file and talking with them on the phone once to get the settlement.

It’s understandable why consumers do not want to sue and to try to work it out. But in reality, that is a lot of aggravation, time for the least amount of gain. However, the satisfaction of wining and getting paid for it is unbeatable. Now, I do not get upset or angry, I just wait for them to play their games and I sue. No warning, no anger and no headaches.

Taking a big company to small claims court of course only applies when you have been legitimately and materially wronged by the company. We’re not talking about spurious claims and people trying to unfairly profit. I make this caveat because I know someone is going to freak out in the comments about hurting the poor company and frittering away tax dollars and how baseless lawsuits make services expensive for the rest of us.

Now that that’s out of the way, here’s some posts we did on how to take a company to small claims court:

How To Take Your Case To Small Claims Court
Here’s a state-by-state index of links to small claims court papers and brochures.

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.

Thursday, July 7, 2011

Credit Card Company Suing You? How to Respond

In some rare cases, they are becoming more common as the financial sector continues to melt down, a collection agency for a credit card company can not sell a defaulted loan.collect.

First, an unheard of strategy for the credit card companies had been used against the debtor. After all, and usually only a few thousand dollars of unsecured loans to banks at a drop in the bucket.pursue a collection agency.

are not willing to cooperate. Debtors who miss a court date a “bench warrant” or “writ of attachment for his arrest” may be excluded.They will either be held until the next court date or up to several thousand dollars cash bond is paid.

Obviously, in many states, elected officials and appointed officials of banks is overpowered. Therefore, such a strategy is in the best interests of borrowers, may be legal and fascistic as they protect against.Even more promising is the fact that some lawsuits by borrowers for unsecured loans are paid in full, as long as they show at the hearing.

Summons to answer

Response to a complaint by a credit card company to answer criminal charges can be remarkably similar.The borrowers more time to research issues and gives his answer ready.

The best way to do this research is the federal law, the Fair Credit Reporting Act (FCRA) to start with. This set of bank accounts to credit bureaus report negative information can and every violation of the Act can cost the bank $ 1,000. Borrowers for each violation of this law to take all relevant research is encouraged.

If you are being sued by Midland Funding, LLC here in Arizona you are not alone. Recently I have seen an increase in the number of clients coming in with lawsuits by Midland Funding and other debt buyers. What is a debt buyer? These are companies that have purchased delinquent debts from banks or credit card companies and then are suing through the state court system here in Arizona to collect on their purchased debts. Understanding how these debt buyers operate will help you in fighting the lawsuit they have filed against you.

How Debt Buyers Operate

Companies like Midland Funding buy debts that have been charged off by the original creditor. In Arizona one major debt buyer, Portfolio Recovery Associates, paid slightly over 2.5 cents on the dollar for the debt they purchased. This means that to buy $100 of debt, this debt buying company would pay $2.50. Once they purchase the debts, they then use the local courts, often the Arizona justice courts, to sue the parties that they allege owe the debt. And they sue in gigantic numbers. In 2008 one debt buyer, Encore Capital Group, filed nearly 450,000 lawsuits throughout the country.

In filing these lawsuits the goal, however, is not to get engaged in a legal battle over the debt; they are planning on you doing nothing and allowing a default judgment to be entered. It is estimated that approximately 90% of the lawsuits filed by debt buyers like Midland Funding result in a default judgment, meaning that the person being sued didn’t even file a response. If you don’t file a response, the court assumes you must agree with what has been alleged and gives the debt buying company everything they are asking for. Once a creditor obtains a judgment against you they can garnishment your wages (up to 25% of each check!).

Click here to learn more

Why You Should Fight!

There are numerous reasons why you should contest a lawsuit by a debt buyer. I have personally handled cases by debt buyers where the person being sued literally did not owe the debt – and in one case had never even had an account with the particular bank! Debt buyers receive minimal information when they buy accounts and typically do not receive the underlying contract or copies of any other communication on the account. Further, many times the debt bought is very old and the statute of limitations has run.

In cases I have handled I am always amazed and the lack of evidence many of these companies have when you ask them to present it in support of their lawsuit. Often they have no actual documented proof that you owe the debt so they include affidavits that are full of hearsay and other non-admissable evidence. The short of it is, if you are being sued by Midland Funding or any other debt buyer it is worth having an attorney review the lawsuit and determine if it is something you should contest.

Limited Scope Representation- An Affordable Way to Fight Debt Buyers

Often debt buyers will file a lawsuit for a relatively minimal amount. When someone is suing you for $1,500 it doesn’t make much sense to pay an attorney $2,000 to represent you. In effort to help clients who need help but either can’t afford full representation in a case or it doesn’t make sense to spend a lot of money on an attorney, my office offers limited scope representation for a fraction of the cost of full representation. I can help you in developing a case strategy, understanding the court process, an even help you draft documents to file with the court. You assist in your case, keeping costs down, and can control how much or how little legal help you receive.

Has credit card debt reached the point you have been sued by your credit card company? When people fall behind in their credit card payments, they can find themselves in legal as well as financial trouble. Credit card companies will inflict serious pressure on the debtor, and proceed to file a default judgment against you, garnish wages, levy bank accounts, and take other legal actions in order to collect.

It can be extremely difficult to pay down credit card debt when you are already strained financially. It is essential that you understand your legal options for avoiding the consequences of a judgment against you. You must not ignore the lawsuit. A credit card lawsuit defense attorney at the Kramer Law Firm can assist you immediately to help you get the lawsuit dismissed and work through other debt settlement strategies with your creditor.

If the original creditor (or a debt collection company) filed a lawsuit against you, there are many actions we can take to stop the effort or work out more favorable debt settlement negotiations.

Speak with an experienced Florida attorney at our firm today.
Call 855-Kramer-Now (855-572-6376).

We have represented individuals throughout Central Florida in debt lawsuit defense, defending the lawsuit and helping them stay out of court whenever possible. We are often able to help people avoid paying anything to the creditor.

Allow us review your case and find the best way to defend you against the credit card company and bring about a satisfactory resolution.

Legal Options When Sued by Credit Card Companies:

Depending on the context of the debt and your personal financial situation, our attorneys can implement credit card lawsuit defense options and workouts to help you avert or fight the lawsuit, including:

• Deny liability in a written response to the court to force a more favorable credit card debt settlement;
• Challenge the creditor’s legal standing to sue. Often, debts change hands multiple times. Whether you are sued by a credit card collection agency or the bank, the company that is suing you may not have the proper paperwork and legal standing to take you to court;
• Demand to see the original documentation of your alleged debt. Often, the amount of delinquent debt reported is inaccurate in favor of the debtor;
• Leverage debt settlement strategies to negotiate the debt down, create more favorable repayment terms, or fight the validity of the debt or the legal action;
• File for Chapter 7 or Chapter 13 bankruptcy to get out of the debt or to force a renegotiation on far more favorable terms.

If you have been notified that you are being sued by a credit card company or debt collection agency, you cannot afford to wait to take action. The Kramer Law Firm can help you select an appropriate option to fight back − not only to settle or stop credit card lawsuits, but also to help you and your family sustain financial recovery.

Our experienced debt defense lawyers can advise you in ways many law firms cannot. Our law firm has helped a great many consumers who were overwhelmed with debt regain full control of their finances. Regaining – or finding – a life without debt is a primary goal we have for our clients.

Contact an Experienced Credit Card Attorney

If being sued by credit card companies has made your life spin out of control, you need representation by a skilled debt defense attorney. If you do not defend against the lawsuit, the credit card company will hold you legally liable for the full amount. Whatever your circumstances may be, the Kramer Law Firm can take effective measures to help you recover and thrive.

Call us, toll free, at 855-Kramer-Now (855-572-6376).

” data-share-img=”” data-share=”twitter,facebook,linkedin,reddit,google,mail” data-share-count=”false”>

Well done to Joe Nocera for giving some well-deserved publicity to Jeff Horwitz’s fantastic (and still ongoing) investigation into the way that banks encouraged debt collectors to sue Americans for credit-card debt they didn’t owe.

Nocera also raises the possibility that people might start, quite rationally, simply walking away from their credit-card debts in much the same way that they have been walking away from their mortgages.

Lawyers on the front lines say that credit card debt collection remains a horrific problem. “Most of the time, the borrower has no lawyer,” says Carolyn Coffey, of MFY Legal Services, who defends consumers being sued by debt collectors. “There are terrible problems with people not being served properly, so they don’t even know they have been sued. But if you do get to court and ask for documentation, the debt buyers drop the case. It is not worth it for them if they have to provide actual proof.”

There are very serious questions about the reliability with which debtors are actually served by the collection agencies who buy credit-card debts from the big banks for as little as $0.018 on the dollar. All too often, the debtor doesn’t even know that they’ve been “served”, and therefore default judgments get filed against them even when the underlying documentation is weak or nonexistent.

But if you do find out that a collections agency is suing you for unpaid credit-card debt, then you should absolutely turn up in court and ask for documentation. By that point, of course, any hit to your credit will already have happened, so you can’t damage your credit score by fighting the suit and refusing to pay.And the simple act of asking the plaintiff to prove that you owe what they say you owe will very often make the whole suit disappear.

So get the word out: if you, or anybody you know, gets sued for unpaid credit-card debt, the first thing you should do is simply ask the person suing you to prove that you owe what they say that you owe. The onus is not on you to provide documentation that you paid off the debt, or anything like that. The onus is on them to prove that the debt exists. Borrowers should not shy away from asking for this proof out the moralistic feeling that they should pay back what they owe.В And it turns out that much of the time, the debt will have been sold to them by a bank refusing to make “any representations, warranties, promises, covenants, agreements, or guaranties of any kind or character whatsoever” about the accuracy or completeness of the debts’ records. If that kind of language is in the transfer documents, it’s very unlikely that the collections agency will be able to win a contested lawsuit.

If people start contesting these suits en masse, then that will surely reduce the attractiveness, to the banks, of selling written-off debt to sleazy collections agencies en masse. If banks want to sue borrowers for money those borrowers owe, let the banks do so themselves. At least it’s more honest that way.

Removing A Repossession

A credit card company or collection agency must take you to court to get a judgment against you. If you lose the lawsuit and a judgment is issued, a creditor can collect the money you owe. Although it’s better to try to settle the debt before you actually get sued, in most cases, a creditor is still willing to settle after judgment.

Being Sued

Creditors often threaten lawsuits if you don’t pay, although sometimes it’s a bluff they use as a scare tactic to pressure you into settling. If you’re unemployed or have no assets, you may be able to temporarily forestall being sued. However, if your financial situation eventually improves, the creditor can come after you again. Creditors and collection agencies aren’t usually willing to settle for less money without first trying all other options available to them for collecting on the debt.

Negotiating a Settlement

Being contacted by an attorney for a creditor doesn’t mean that you are being sued. Even at this point, you may be able to negotiate a settlement. If the attorney is willing to negotiate the debt for less than the full remaining balance you owe, the amount you will have to pay varies. The reasons for not paying can have an impact on whether a creditor is willing to work with you as well as how much less it is willing to take. According to Mark Brinker, founder of the debt settlement firm Hoffman, Brinker and Roberts, while some creditors will settle for as little as 30 cents on the dollar, others won’t take less than 50 percent of the outstanding balance you owe.

Statute of Limitations

Before contacting the credit card company or collection agency in an effort to settle the debt, check the statute of limitations in your state. If the time the law allows to collect the debt has passed, the creditor can no longer take you to court. Although credit card debt that is older than the statute of limitations is not collectible, the statute of limitations varies by state. Even if the statute in your state expires, the bad debt may still appear on your credit report. As a rule, negative entries remain on your credit report for seven years. Likewise, even after the debt no longer shows on your credit report, you can still be sued if the statute of limitations hasn’t expired.

Settling a Judgment

If a judgment is filed against you, a creditor may be able to garnish your wages, place a lien on your property or levy your bank accounts. While you can still settle an outstanding lien or judgment for less than what you owe, hire an attorney to file the necessary paperwork with the court once you finalize the settlement. Settling a judgment can be in the creditor’s best interest as well as your own. It costs a creditor time and money to recover a judgment. For one thing, the creditor will have difficulty collecting the judgment and related court costs if you have no assets or if you have more liabilities than assets. Before paying off the judgment, get the agreement in writing detailing the terms and conditions.

More Articles

What Legal Action Can Be Taken If You Owe on Credit Cards? →

What If My Creditor Files a Judgment? →

What Happens if a Creditor Refuses to Accept Your Offer? →

From individual credit card issuers to major US banking institutions, here’s what you can expect for credit card and banking relief.

Credit card issuers such as American Express are accommodating financial needs during the coronavirus outbreak.

The coronavirus isn’t just a minor inconvenience for some. Its growing impact is causing financial hardship for millions of people.

With businesses closing, layoffs and unpaid leave could mean you’re unable to afford your regular bills. During this time, many US banks and credit card companies are offering temporary relief and assistance so you don’t fall behind on payments. And if you’re unable to stay current, there are programs in place to make sure you don’t face unnecessary fees, a credit score drop or other penalties for late or missed payments.

Coronavirus updates

• What it’s like to use an at-home coronavirus test
• Stimulus package talks are ramping back up
• Alexa is more vital than ever during coronavirus, and Amazon knows it
• News, advice and more about COVID-19

Ally customers won’t get charged overdraft fees, excessive transaction fees or fees for expedited checks and debit cards. Fee waivers are in place until at least July 16. If you have questions, comments or concerns, Ally is encouraging customers to use its website, since call wait times will likely be longer than normal.

American Express

Call the number on the back of your Amex card or log in to your American Express account to chat with a representative about your financial hardship. American Express is working with customers individually to provide specific help based on your needs. Contact the company if you need help with:

• Temporarily lowering your interest rate
• Avoiding past-due payments and charges
• Removing late payment fees
• Lowering your monthly payment

Apple Card

According to a Goldman Sachs representative, Apple Card users can contact support to enroll in Apple’s Customer Assistance program. This will automatically let you skip your March credit card payment without being charged interest.

You can request enrollment through your Wallet App on your iPhone or online.

Bank of America

If you’re a Bank of America customer, you can contact it directly about your individual issue. Bank of America is working with customers on a case-by-case basis to determine the right course of action based on your individual circumstances.

If you’re a Bank of America customer with financial hardship, contact them to inquire about:

• Eliminating fees, like monthly maintenance fees, overdraft fees, late payment fees, minimum balance fees and others
• Waiving interest charges if you carry a balance from month to month
• Increasing your credit card limit so you can buy necessities without maxing out your card

If you’ve already seen charges and fees removed, call to see if you can get them refunded.

Try to contact Bank of America online or over the phone, rather than visiting a physical branch, to ask about your financial hardship.

Capital One

Like other banks, Capital One encourages customers to contact it directly if you’re facing a financial hardship. Ask it about lowering or eliminating fees, deferring payments and lowering the interest rate.

Chase

Contact Chase by calling the number on the back of your card or log in to your account. Inquire about fee waivers or refunds, increasing your credit limit or changing your due date.

Citibank

For Citibank customers, you can expect help with:

• Waived fees for early CD withdrawal
• Monthly service fee waivers
• A credit line increase
• Forbearance programs in case you can’t make minimum payments when they’re due
• Other hardship assistance programs

Assistance is available for at least 30 days starting from March 9.

Wells Fargo

Wells Fargo encourages customers to reach out for assistance based on their individual needs. You can ask about:

• Fee waivers, like late payments, overdraft and minimum balance fees
• Payment deferrals in case you can’t make your payment this month and don’t want to face extra charges
• Increasing your credit card limit

Avoid visiting a Wells Fargo branch and instead contact customer support by calling the number on the back of your card.

Alternatives to hardship programs

While contacting your bank or credit card issuer should be your first stop in finding financial hardship assistance, it’s not your only option. Your issuer can help you determine what you qualify for, whether through them or other means, like:

• 0% APR balance transfer credit cards: Apply for a card with a 0% introductory APR so you can avoid interest charges during this difficult time.
• Dip into your emergency fund: The worldwide impact of the coronavirus is an emergency for everyone. If you have spare cash, now is the time to dip into it. Use it for the most important reasons, like paying for food or medication for you or your family. If you have enough to make payments on your bills, then do so. But see if you qualify for hardship assistance first.
• Take out a personal loan: While not everyone might qualify for a personal loan, dire situations like COVID-19 are reason enough to take one out. Personal loans usually have lower interest rates compared to credit cards and many private lenders offer their own hardship assistance. For example, SoFi offers unemployment protection where your loan will go into forbearance. Payoff also offers hardship assistance.
• Community assistance: Many state and local agencies are providing financial relief to the most vulnerable people impacted by COVID-19. Try searching for programs that are available in your area to see what you qualify for. For example, call 2-1-1 where you live and you’ll get matched up with resources based on your needs, like help paying bills or money for groceries.

We’ll get offers from your creditors that save you money.​

Get your first no-obligation offer from your creditor in just a few days. It’s up to you if you want to accept it.

The best defense against being sued for credit card debt is, of course, to pay your debts before that happens. That doesn’t necessarily mean paying them in full or right away. But even if you’ve already received notice of a lawsuit, it’s not too late to settle your credit card debt before you end up going to court.

If you think there’s a chance you could be sued or you’ve already received notice of a lawsuit, you should contact your creditor or debt collector. Lawsuits are time-consuming and expensive, so the creditor or the debt collector may be willing to negotiate a settlement with you instead.

How to prevent a lawsuit

Although not unheard of, it’s rare for credit card companies to sue you before you’ve missed several months of payments. Your risk for being sued goes up past the six-month mark, which is when many creditors charge off an account. That’s when the creditor writes off a debt as uncollectible and reports it as a charge-off to the credit bureaus. You are still responsible for the debt, though. That’s also the point when your creditor might hand your debt off to a third-party collection agency or sell it to a debt buyer.

To avoid a lawsuit, try to settle your debts before a charge-off occurs. Call your creditor or the debt collector and see if you can negotiate a settlement, meaning it will accept less money than what you owe to settle the account. You can do this on your own or hire a debt settlement company to handle the negotiations.

Negotiating a settlement and coming up with the money to pay the settlement before a charge-off happens can be tough. That’s especially true if you have more than one delinquent account. So you might target one or two accounts to settle first. It’s important to know which accounts you should prioritize — for example, the ones most likely to sue you. (The Resolve tool can help you identify which creditors to put at the top of the list.)

What to do if you’re being sued

In some cases, you might not be able to fend off a lawsuit. If you receive a court summons, the important thing is not to ignore it. Unless you negotiate a settlement in time and the lawsuit is withdrawn, you should file a response to the summons by the deadline. In most cases, you’ll have 30 days to respond, but some states provide only a few weeks.

If you don’t respond, an automatic or default judgment could be placed against you. That could give debt collectors or creditors the ability to garnish your wages, take money from your bank accounts and even seize your property to pay off your debt. You obviously don’t want that to happen.

Before you do anything, make sure you understand who is suing you. Are you being sued by a debt collection lawyer on behalf of your credit card company or is it being brought by a debt buyer?

What to do if you’re being sued by a collection attorney representing a debt buyer

A debt buyer is a company that buys other companies’ unpaid debts. Unlike debt collectors, debt buyers own the debt and are not attempting to collect on behalf of the original creditor. They pay different amounts for the legal rights to the debts they buy. The more recent the default (6 to 12 months in default) the more they typically pay for the debt. Then, the longer the debt’s in default, the less it costs to buy them. Credit card debts have been bought and resold several times over the course of years.

Because debt buyers invest in unpaid debts, they take a risk that they can get some distressed credit card borrowers to pay up. And they’re also willing to settle the debts for less than what is owed. They’ll either collect debts using their own debt collectors, assign accounts to a third-party collection agency or place accounts with debt collection law firms they have relationships with.

Whether you’re sued by an attorney or a debt collector hired by a debt buyer, they’re often rewarded financially by the results they get. In order to determine how likely you are to be able to pay some of that debt, they often use sophisticated tactics (sometimes called skip tracing) to locate you and collect information from credit reports, public records databases, loan applications, utility bills, etc.

Often, however, their information is incomplete (at best) or just plain inaccurate. First, you should find out how old the debt is. Check your records to see the last time you made a payment on the debt. There’s a statute of limitations on how long you can be sued for payment of a debt. It varies by state, but most statutes are three to six years. If the delinquent debt is past the statute of limitations in your state, it’s considered expired. But admitting that the debt is yours or paying a portion of it could reactivate the debt.

Second, if the amount of the debt is wrong or it doesn’t even belong to you, you can challenge the lawsuit by filing a response in court. You can then contest what’s in the lawsuit or ask the court to dismiss it. There are a few resources that could be helpful if you wish to dispute a lawsuit:

• Check the Fair Debt Collection Practices Act (FDCPA) for specific violations such as improperly serving you, serving the wrong person with the same name and/or violating the statute of limitations.
• Check your rights under the Fair Credit Reporting Act (FCRA) if you suspect you are being sued for a debt as a result of identity theft.

How to negotiate a settlement before going to court

If the debt is active and valid, try to stop the lawsuit by contacting the creditor or the attorney listed on the summons to discuss a settlement. You might offer to pay some of your debt with a lump-sum payment or in monthly installments. Come up with an amount that you can afford and that you think the creditor or collector will accept. If you offer a lump-sum payment, you may need to have that money ready quickly.

You or the debt settlement company you’ve hired may have to go through several rounds of negotiations before a settlement is reached.

When to hire your own attorney

To buy more time, or if the summons deadline is nearing and you don’t have an agreement yet, respond to the summons. You may want to hire a lawyer to help you file a response and continue negotiations with the parties to the lawsuit. Many attorneys offer free consultations and can help you understand your options, as well as whether the benefits of those options are worth the legal costs and what your rights are. (Resolve can connect you with attorneys who can file your response to the court summons for as little as $200 as well as continue negotiating a settlement in an effort to avoid going to court.)

As always, if you reach an agreement, make sure you get it in writing.

How Resolve can help

If you’re dealing with debt and not sure what to do, we’re here to help. Become a Resolve member and we’ll contact your creditors to get you the best offers for your financial situation. Our debt experts will answer your questions and guide you along the way. And our platform offers powerful budgeting tools, credit score insights and more. Join today.

Sirinarth Mekvorawuth / EyeEm / Getty Images

Some debt collectors including some credit card companies will try to bully you into making a payment by threatening to garnish your wages. If this is happening to you, it’s important for you to understand the laws around wage garnishment, how having your wages garnished can impact your credit report, and what you can do to help protect your income from creditors.

The Legality of Wage Garnishment

Can they actually follow through on that threat? Yes, but not until they sue you, win, and have a judge decide to garnish your wages as the method of payment. It’s illegal for debt collectors to threaten you with a lawsuit if they don’t intend to do so or if they can’t legally do it. Your credit card is unlikely to actually sue you for wage garnishment but they can certainly hurt you in other ways, including damaging your credit report and involving a debt collection agency.

Don’t Ignore a Lawsuit

If you are served with legal documents about a lawsuit, it’s in your best interest to contact an attorney. Don’t ignore the lawsuit as doing so will only hurt you. If you don’t show up to court, the plaintiff (whoever filed the lawsuit) can have a default judgment entered in their favor. This means you automatically owe whatever amount the creditor sued you for and the court decides how to get the money from you, possibly through wage garnishment.

If you receive a notice from your employer about your wages being garnished but were never served with lawsuit papers, you should immediately contact a lawyer. Chances are good that the creditor/debt collector didn’t follow the correct process and you may be able to get the judgment overturned.

You can avoid a lawsuit and garnished wages altogether by paying off debts before they become seriously delinquent. Creditors can sue you, whether you owe them $500 or $50,000.

Wage Garnishment and Your Credit Report

When a creditor sues you and wins, a judgment is entered on your credit report and remains on there for seven years from the date of filing. As time passes, this judgment will impact your numerical credit score less and less ​but will be visible to future creditors for years. This could impact your ability to open other credit cards, get a mortgage, or buy or lease a car.

Protecting Your Wages From Creditors

While creditors, including credit card companies, do not often file wage garnishment lawsuits, if you have a steady job and seriously delinquent debts, wage garnishment is a very real possibility. It may be that your state is one of the states which prohibit wage garnishment. Or your maximum wage garnishment amount might be either so low or your income might be so high that having your wages garnished won’t impact your lifestyle. It is also possible that a court could rule that the creditor may levy your bank account rather than garnish your wages, which will absolutely impact your lifestyle.

Rather than risk wage garnishment or a bank levy, you should reach out to your credit card companies and try to work with them to settle your debt. If your account is seriously delinquent, it may be too late to fix your credit report but you may be able to salvage the situation with regards to how much you owe. Often credit cards will settle for a fraction of the debt, usually in a bulk payment, although you may be able to negotiate a payment plan.

Credit card chargebacks happen when a customer requests their bank returns their funds for a purchase or when your customer’s bank detects a problem with a transaction. They frequently occur when a consumer is unable to obtain a refund directly from you, the merchant, and instead forcibly takes their money back. In other words, it’s a forced refund where the customer doesn’t necessarily have to give anything back. Chargebacks are generally very bad for merchants as they often come fees that range between $20 and $100. If a business has too many chargebacks as a percentage of their total transactions, their account can be shut down or their per transaction costs may go up significantly.

Credit Card Chargeback Time Limit & Rules

Generally, consumers have to file a chargeback between 60 and 120 days from the time of the original purchase. After that happens, merchants have approximately 45 days to respond, if they wish to dispute it. These rules are set by the credit card processing company and will differ based on the card in question – be it a Visa, Mastercard, American Express or Discover card. After a merchant submits a response, the merchant bank will investigate the evidence and make a determination. If arbitration is deemed necessary, the entire process can take much longer to complete.

Typically, the entire lifecycle of a credit card chargeback works as follows:

• First, the consumer submits a complaint with his or her issuing bank.
• Then the issuing bank verifies whether the dispute is valid. If the bank finds the consumer is at fault, the process ends here.
• Following that, the consumer is immediately refunded money, and the cardholder’s bank official initiates the chargeback process and contacts the merchant’s bank.
• After this, the merchant bank verifies the request and conducts their own investigation. At this point, the merchant is also notified that a chargeback is being processed.

From here on, one of two things can happen:

• If the chargeback is deemed invalid by the merchant bank, the processor will contact the consumer’s bank and inform them of their findings. This happens very rarely.
• If the chargeback is deemed valid by the merchant bank, the merchant will be asked to provide documentation so they can counterclaim the chargeback. If the merchant provides sufficient proof that they were in the right, the chargeback will be stricken from the record and the issuing bank will remove the funds from the cardholder’s account once again. Otherwise, the chargeback stays, and the funds are removed from the merchant’s bank and an additional fee is charged to the merchant.

How To Prevent Credit Card Chargebacks

The best way to prevent credit card chargebacks is to adhere to policies and guidelines set forth by each of the payment processing networks. Follow these links to get to Visa’s , Mastercard’s , American Express’ , and Discover’s chargeback rulebooks. The general summary of the points made by each of these companies for you to always make sure you:

• Obtain proper verification from your customer. Make sure they sign their receipts, and that the name of your business is legible on their bill.
• Verify that the card they are using is not expired.
• Follow proper PCI rules, and verify that the cardholder is actually who he/she says they are. This includes verifying the signature on the back of the card, and checking for identification when necessary.
• Make sure your business adheres to current security standards, like EMV readers
• If possible, capture your customer’s signature digitally and have sales staff compare that signature to the one on the back of the customer’s card
• Do not accept credit cards with no signature on the back
• Make sure all of your employees who handle credit card payments adhere to these best practices

Any business that accepts credit card payments will have to deal with chargebacks. They are, to a certain level, unavoidable. Your best chance at fighting back against chargebacks will be when faced with so-called friendly fraud, or chargeback fraud. In these instances, you will have the easiest time getting the chargeback reversed, provided you submit the proper paperwork.

Another key way to avoiding chargebacks is to understand why they occur in the first place, and then setting up policies that prevent these situations from arising at your establishment. According to Visa, the most common chargeback reasons include:

• A credit has not been processed when the customer expected it would be
• Merchandise ordered was never received
• A service was not performed as expected
• The customer did not make the purchase; it was fraudulent.
• A Processing error occurred
• Authorization issues

Credit Card Chargeback Merchant Rights

Unfortunately, merchants do not have many protections when it comes to fighting against chargebacks. Even if your store has a ‘no refund’ policy, the Fair Credit Billing Act allows consumers to file chargebacks. Despite that, it is advised that business owners clearly display their policies and make consumers aware of their sales rules. This may become relevant if a chargeback ever goes through an arbitration process, and generally helps with the above process of fighting against chargebacks.

By most accounts, banks tend to favor the cardholder over the business owner in most chargeback disputes. This is why it’s important for merchants to do everything in their power to have purchases and transactions well documented, and in strict accordance with the rules set forth by the card networks.

Chargeback Codes

Here is a list of official Visa and Mastercard chargeback codes for some of the most common issues that arise. These codes along with additional guidelines will be presented to the merchant whenever the merchant bank sends out the chargeback warning. More codes can be found in the network guidebooks that were linked above.

After covering JP Morgan Chase’s decision to forgive the credit card debt of its Canadian cardholders, I wanted to focus on one of the other big (but often overlooked) credit card stories of our time–the aggressive enforcement efforts against those with credit card debt taken by Capital One and Midland Credit Management.

If you are someone who struggles to pay your credit card bills on time, you should stay far and away from Capital One. To understand why, I strongly suggest that you take a read of “At Capital One, Easy Credit and Abundant Lawsuits” that documents the number of lawsuits filed in connection with Capital One credit card debt.

In one study of a Las Vegas Justice Court over a multi-year period, 56,054 lawsuits were filed by Capital One for credit card debt. The next closest was Citi with 15,579, Discover with 14,666, before dropping off to Bank of at 8,832. This data point was not merely a function of size, as Capital One is only the fifth largest credit card lender in the Las Vegas area despite filing 4x as many lawsuits for overdue credit card debt as its next closest competitor. Some of the variance can be explained by the fact that Capital One borrowers have a 32% higher default rate than the typical borrower at large, but that alone does not account for the higher number of lawsuits filed.

Very few people know about this, but Capital One runs a partnership with Experian through its PowerCurve Collections to figure out exactly how to collect money from an overdue credit card holder. If you live in, say, St. Louis County, Missouri and have a $4,300 credit card balance, the PowerCurve Collections software service will scan the publicly available real property and personal property records to make an educated guess as to whether you own a house and car, how much debt is secured against it, and how much equity you have in your home and personal property. They also operate a network of banks that identify where you are likely to maintain a bank account.

This is relevant because, although credit card debt is “unsecured” and cannot lead to a claim against your home, car, or bank account by itself, an unsecured debt becomes a secured debt once it results in a legal judgment. That is to say, when you are sued over a debt and a judgment is entered against you to pay the debt, the $4,300 balance mentioned above now becomes a “judgment lien” that attaches to any real property you own in the county where the judgment was rendered against you. In addition, there a registration process for the debt to attach as a lien to your homes in any other state or county due to the Uniform Enforcement of Judgments Act (which every state except California, Vermont, and Massachusetts follows). There are also registration processes for the payment to become a lien against your car in certain states. In all states, it is also possible to garnish wages pursuant to a judgment.

Long story short, Capital One knows where you own, what you drive, and where you bank at the time that it files suit against you for overdue credit card debt. Other times, it works in connection with its preferred partner Midland Credit Management, LLC in which it sells your overdue credit card debt to Midland Credit Management, which gives them an assignment to collect the debt that you owe to them. Generally, the fewer assets you have and the harder it is to collect against you, the more likely that Capital One will sell your debt to Midland Credit Management (MCM) to collect against you.

Now, here is where things get interesting. In approximately 89% of the cases, Capital One or Midland Credit Management will file suit and collect a default judgment against you. This means that, after paying filing fees and hiring an attorney to obtain the default judgment, either Capital One or MCM will be in a position to attach a lien to your house or garnish wages from your bank account. They assume that the credit card holders that it sues will either be unfamiliar with the judicial system and not show up to court at all or they’ll have a vague sense that they owe the credit card debt and figure there is nothing they can do.

This view is unfortunate because Capital One is not only aggressive about its collection efforts but it is so heavily reliant upon debtholders not showing up to court that it is often sloppy with the required paperwork necessary to collect upon a debt. When Capital One attempts to collect on a credit card debt, the debtor is allowed to demand “strict proof” that the debt is due and owing and in many states is even legally entitled to bring in a representative of Capital One to an evidentiary hearing to go over the total amount borrowed and to confirm the accuracy of each payment. In recent history, Capital One has struggled to produce a representative in court because the cost of doing so is often not worth the potential upshot.

For matters involving debt that is sold to Midland Credit, the debtors can often raise what is called a “lack of standing” argument where Midland can be demanded upon to prove via certified records that it received the assignment and also a Capital One representative can be required to provide strict proof of the underlying debt as well. In all cases, this would be an expensive endeavor for Midland Credit and in some cases Midland Credit may not even have the proper documents to prove it has standing to enforce the debt as seen in the recent New York Court holding in Midland Funding, LLC v. Coia.

The Consumer Financial Protection Bureau is expected to issue a major report next week on what consumer advocates say is one of the leading but most misunderstood ways that companies limit a customer’s rights, people familiar with the matter said.

The practice is called “mandatory arbitration,” which bars consumers from filing class action lawsuits or taking other steps to seek relief after they feel a company has wronged them. Such arbitration clauses are often found in the fine print of credit cards, payday loans and auto loans.

Consumers instead are steered into arbitration, which critics say is a secretive process that is often stacked in the company’s favor and leads to little benefit for consumers. “The unfairness here is incredibly widespread,” says David Seligman, staff attorney at the National Consumer Law Center.

Most people aren’t aware these agreements exist until after they feel they’ve been wronged and attempt to sue a company or seek some other form of retribution, the advocates say. Many consumers then learn that they unwittingly agreed to mandatory arbitration when they initially signed up for the credit card or loan.

“You either agree to give up your right to hold these companies accountable,” Seligman says, “or you don’t use a credit card, or you don’t take out a loan or you don’t use a card.”

But financial firms argue that by limiting litigation, companies pay less in legal fees and, in turn, can lower costs for all consumers.

“If the card issuers’ costs go up, so does the consumer’s price,” says Nessa Feddis, a senior vice president with the American Bankers Association. Feddis added that, in general, credit card companies have a good record of accommodating the concerns of ordinary people, reducing the need for arbitration. And for some consumers, arbitration may be less intimidating than going to court, she said.

The CFPB’s report, ordered under the Dodd-Frank Wall Street Reform and Consumer Protection Act, is widely expected to lead to new rules limiting how companies can use mandatory arbitration clauses, consumer advocates say. The timing of the release of the report was confirmed by people familiar with the matter who spoke on condition of anonymity because the research has not yet been made public.

The CFPB has announced it will hold a field hearing on the topic next Tuesday in Newark, where the agency’s director Richard Cordray is scheduled to speak and consumers will get a chance to share their experiences with arbitration.

While consumer advocates have been following the problems caused by forced arbitration for years, little is known about the outcomes seen by consumers who decide to go through the process. Part of the reason is most arbitration disputes are private.

And when companies offer refunds or compensation to consumers, the secrecy surrounding the process makes it difficult for other customers to learn of problematic practices that may also be affecting them. “Many consumers may not be aware that they’re being taken advantage of as well,” says Christine Hines, consumer and civil justice counsel at Public Citizen, a nonprofit that supports consumers’ rights. In contrast, lawsuits are a matter of public record.

Mandatory arbitration is very common with consumer products issued by bigger financial institutions. Some 62 percent of the 50 largest banks had arbitration clauses in their contracts for checking accounts at the end of 2013, according to preliminary findings from the CFPB released in December 2013. The practice is less common among small financial firms.

In addition to restricting people to arbitration, about 9 out of 10 arbitration clauses bar consumers from participating in class action lawsuits or even grouping together in the arbitration, according to the CFPB. By preventing consumers from taking action in groups, arbitration clauses significantly reduce the chances that consumers making smaller claims will seek payment, critics of the practice say.

Do you get those envelopes in the mail offering you a credit card? Millions of Americans do every day, and we have one company to thank: Capital One. Capital One is the 8th-largest bank holding company in the country, with nearly 1,000 branches and 2,000 ATMs. In the 1990s, it started mass-marketing credit cards through the mail and hasn’t looked back – it’s now the 4th largest customer of the United States Postal Service and the 2nd largest customer of the Canadian post office.

It’s also the largest filer of lawsuits against its borrowers – by a lot.

Credit Card Lawsuits

When you fall behind on your credit card payments, your credit card company will start sending you letters and calling you to ask you to pay. If that doesn’t work, they have 2 options: sell your account to a collection agency or sue you for collection. A collection agency will also try to call or send letters to collect and may eventually decide to sue. In other words, you’re at risk for a lawsuit whenever you fall behind on your payments. Once they’ve sued and gotten a judgment against you, they’ll be able to garnish your wages or levy your bank accounts for payment.

Wage garnishment can be a very serious burden – even those earning minimum wage can see a significant chunk of their earnings pulled out to repay the debt. Wage garnishment tends to hit low-income households the hardest – about 5% of those earning less than $40,000 per year had their wages garnished in 2013, as opposed to 3% of the population as a whole. That’s a double-whammy; those households are more likely to end up behind on their payments in the first place and are least likely to be able to afford to lose a chunk of their wages to garnishment.

However, there are plenty of accounts that never end up in court. If your outstanding balance is small enough, the cost (both in time and in money) of taking you to court is too high to be worth the credit card company’s time. They’ll report it to the credit bureaus, so your score will take a hit, but they often won’t actually file a lawsuit against you.

What’s Different About Capital One?

Capital One’s portfolio of credit card debt is different from that of many other lenders. It has a high concentration of “subprime” accounts, or accounts held by borrowers with low credit scores. Those credit cards carry a very high rate of interest because subprime borrowers are more likely to default. That means Capital One provides credit to many who wouldn’t be able to get it otherwise, but it also means that more of its accounts do end up defaulting.

Credit card companies make their money when you don’t pay your card off in full every month so you have to pay interest. If you default and don’t pay anything at all, they’re losing money. If a large percentage of the credit card company’s portfolio defaults, they may end up losing serious money – that’s similar to what happened during the 2008 housing crisis. That’s why credit card companies sue you for collection. They’re trying to keep making their money, or at least limit their losses.

Capital One Sues More Borrowers Than Any Other Lender

So, any credit card company may sue a borrower for collection when that borrower defaults. Because of its large portfolio of subprime loans, Capital One has a large number of defaults and a large number of potential lawsuits – and it’s filing them.

According to a study of the court records of 11 states by ProPublica, Capital One files far more lawsuits than any other credit card company, despite having only the fourth-largest portfolio of credit card debt. In 2014 in Indiana, for example, Capital One filed more than 3,000 collection lawsuits – more than every other major credit card company combined. It filed almost half of the collection suits in Nevada and Florida in 2014.

Not only is Capital One filing more claims than any other bank, it’s also filing smaller claims. The average amount of one of their claims in New Jersey, for example, is about $1,500. In contrast, the average Bank of America claim is more than $4,500. Many of Capital One’s suits are for amounts as small as $1,000.

Black borrowers are particularly at risk – Capital One gets judgments against borrowers from predominantly black communities twice as often as against borrowers from predominantly white communities.

What Does This Mean For You?

First, it means you need to check your wallet. Do you have a Capital One credit card? Is it in default? If so, you’re at risk for a collection lawsuit. The good news is that you have options for dealing with it.

Reach out to Capital One and ask them to work with you on your account. Being pro-actice in this way is an important step, and a much better approach than ignoring the problem and hoping it goes away. It’s easier for them to work with you and help you pay voluntarily than it is to sue, so they may be willing to change your interest rate or let you settle your debt.

If you are sued for debt collection, either by Capital One or by a debt collection agency, you are entitled to verfication of the debt under the Fair Debt Collection Practices Act. Make a written request for verification of the debt, ideally by certified mail, so that details of the debt you owe are provided to you. This act is intended to prevent debt collectors from using coercive or unfair practices against you when collecting debts, and will give you greater peace of mind about what you actually owe and why.

If you can’t reach a solution by working with Capital One, it’s time to sit down and take a good look at all of your finances. Evaluate your income and your debt and see if you can work repayment into your budget. If not, you may want to consider filing a bankruptcy to wipe out your unsecured debts (credit card and medical debt, among others). Bankruptcy will hurt your credit score, but so will a collection lawsuit and the subsequent wage garnishment. If you wait for Capital One to sue, the ball is in their court and you may end up losing up to a quarter of your paycheck. If you’re proactive, you have control over how you want to manage your debts and your income – and you may even be able to wipe most of those debts out.

If you’re struggling with debt, contact us today for a free consultation to learn about your options for wiping your financial slate clean.