In some rare cases, though they are becoming more common as the financial sector continues to crash, a credit card company may not sell a delinquent debt to a collection agency. Instead, you can sue a borrower directly and try to get a default judgment and start garnishing wages, encumbering property, or collecting the debt in any other way the law allows.
Previously, this was an unheard of tactic for credit card companies to use against debtors. After all, the debt was unsecured and usually only a few thousand dollars, less than a drop in the ocean for many banks. Hiring local lawyers to sue the borrowers would typically cost more than the company would charge for the debt, so the credit card companies simply wrote the loan off on their taxes and sold it for pennies on the dollars to a collection agency to follow up.
However, in recent years, state legislatures have made it easy for borrowers to be sued, have their property stolen, and even jailed if they are unwilling to cooperate with the civil suit. Debtors who miss a short date may have an “arrest warrant” or “garnishment order” for their arrest. County sheriff’s deputies can then invade the person’s home or workplace and arrest them on the spot. They will be held until their next court date or have to post a cash bond of up to several thousand dollars.
Obviously, in many states, the bank-appointed officials have dominated the people’s elected officials. Therefore, it is in the best interest of borrowers to defend themselves against such tactics, however legal and fascist. Fortunately, this site and others can help prepare borrowers on what to do when they receive a summons for a credit card lawsuit from an original creditor and how to respond to the lawsuit. And even more promising is the fact that few unsecured debt judgments are paid in full by borrowers, as long as they show up for hearings.
responding to the summons
Responding to a complaint from a credit card company can be very similar to responding to a foreclosure lawsuit. Debtors can immediately request more time by filing a Motion for Extension of Time, which will stay the lawsuit for an additional thirty days. This gives borrowers more time to investigate the issues and prepare their response.
But if the lender violated certain laws or did not follow proper court procedures, debtors can have the lawsuit dismissed without filing an answer. Especially depending on the notice requirements for such a lawsuit and the bank’s failure to attach the original contract to the lawsuit, it may be worth filing a Motion to Dismiss based on these procedural failures. Just like when homeowners in foreclosure ask the bank to “show the promissory note,” people who are being sued by the credit card bureaus can do the same.
However, property owners who have exhausted the possibilities of a Motion to Dismiss will need to file their response to the Summons and Complaint. The best way to do this is to research federal laws, starting with the Fair Credit Reporting Act (FCRA). This law dictates how the bank can report negative account information to the credit bureaus, and each violation of the law can cost the bank $1,000. Borrowers have every incentive to investigate this law and select all relevant violations. Since these lending laws are nearly impossible for creditors to follow, there will always be some violations.
Most of the time, simply by filing a Motion to Dismiss and then filing an Answer to the Complaint, borrowers can force the bank to agree to some type of payment plan or settlement. Especially if there are enough violations of the FCRA or other laws that would eliminate most of the lender’s debt anyway, it is in their best interest to end the lawsuit and settle. It is especially expensive for creditors to sue people in court for unsecured debts, because the longer the case drags on, the more attorneys’ fees cost, and banks often collect very little from borrowers for such defaulted credit card debts. They can also be discharged in Chapter 7 bankruptcy quite easily.
Debtors may also request that the courts offer some type of negotiation or arbitration between them and the original creditors. A judge can order the parties to try to settle to avoid further legal battles, and if the terms are agreed to by both parties, the lawsuit will be stayed. Borrowers will have the opportunity to pay a portion of what they owe, and creditors will not be able to continue their lawsuit in court.
Very few cases involving foreclosures, collection agencies, or credit card companies make it to trial. Banks and borrowers almost always settle for less than the full amount the bank asks for in its lawsuit, and debtors are happy to pay a little to settle the lawsuit. But even if the case does go to trial, homeowners can be prepared to defend their side of the story by investigating what laws and procedures the bank has violated that quash their claims against borrowers or at least severely compensate them.
Did the bank even lend money?
It is worth mentioning here a defense to a lawsuit filed by the original credit card company. This is the so-called Jerome Daly defense, which argues that because the bank creates the money for each credit card transaction out of thin air, there is no valid contract. For a contract to be valid, each party must make some kind of consideration. Banks that create money out of thin air for borrowers to incur debt do not count. Including this argument in the answer to the lawsuit may not work, depending on the judge, but it can always be included in a Motion to Dismiss the case.
