Are You Being Sued for a Credit Card in Default?

By: Joshua B. Swigart

Nobody wants to accrue credit card debt. But debt is a reality and, often times, paying the debt off is a scary prospect. That fear, coupled with the amount owed and hefty interest payments, often leads many consumers to think they’ll never be able to pay off the credit card.

We have yet to meet a client who states they took out one or more credit cards, only with the intention to default. Typically, a credit card is used to pay an unexpected monthly expense that arises. Regular payments are made with the intention of paying off the balance, eventually. And then “life” happens – a major financial contributor loses their job; an unforeseen medical situation arises which results in mounting medical bills; or there is an injury at work.   

As a result, consumers are forced to stop making payments all together, as their priorities turn to the necessaries of life (rent, utilities, gas, and food). When that happens, many consumers reach out to their banks for accommodations or modified, reasonable payment terms. The unfortunate common story we hear from our clients is that the bank simply will not work with them. In response, their bank either sues the consumer directly or sells the account to a debt collector who then initiates a lawsuit.  

Many individuals feel so overwhelmed and confused when they’re served that they default on the lawsuit. However, just because you are facing a collection lawsuit does not mean you may have to let the banks win with an easy lay-up.

If you’re faced with this situation, the best thing you can do is respond and find an attorney with experience in handling and defending these collection actions. The right legal counsel can actually create a strategy that shifts the card’s “mandatory arbitration clause” to favor the consumer. Let’s look at how this legal strategy can work for you.

When you apply for a credit card, it’s more than likely you agreed to accept mandatory and binding arbitration in order to use the card. Arbitration is an alternative dispute resolution technique that keeps disputes out of the courts. So if the consumer has a legal claim against the credit card company, they’ve agreed to take that claim through mediation instead of remedying it through a lawsuit. The credit card companies require arbitration because they are trying to shield themselves from liability and waive any potential class action lawsuits.  

An attorney can help the consumer initiate the arbitration, which they will likely qualify for a fee waiver to do. The bank will then have to pay all the fees for the arbitration forum and the judge, which will end up costing the company upwards of $10,000. These are expenses the company cannot recover from the consumer.

For example, the credit card company will likely sue to collect less than $5,000 from the consumer. The filing fee for the company is $6,000 plus fees going forward. That amount will likely eclipse $35,000 at the hearing, just to get a judgment of $5,000 against the consumer. Therefore, the case becomes uneconomical for the credit card company to pursue in this alternative forum. Pursuing arbitration against the credit card company in response to receiving a summons is a smart tactical move that can more than level the playing field. 

If you have received a summons on a defaulted loan or credit card, or are merely receiving collection letters and a threat of a lawsuit, we are here to help. Send us the communications you receive from your banks or other financial institutions and we have resources to identify if an arbitration agreement exists.  With this knowledge we can outline and develop a strategy to handle these accounts, usually with the initiation of an arbitration proceeding. 

Our track record is proven when resolving these matters on favorable terms to the point we will often not charge a fee unless we can successfully resolve the account.  If you would like our attorneys to review your matter, collection letters or the summons you were recently served with, please contact us to schedule a free consultation. We know you will feel relieved to understand your rights and have a custom strategy developed to favorably resolve your debts.

Swigart Law Group helps people who have been injured by banks, employers, drug and medical companies, or large corporations, and creates a meaningful and profound impact on the lives of people in the community. Our attorneys are experienced in the areas of consumer protection, privacy and data breaches. Unlike large law corporations, we hand-pick every case we take and we give each of our clients undivided personal attention.