Why do credit card companies sue consumers?

It must be quite a scare when the average consumer hears that he or she is being sued by a multi-million dollar credit company. People wonder why and how this can happen. It happens for the same reason that anyone attempts to take you to civil court; because you owe them money.

When you owe a lot of money on a credit account and continue to miss minimum due payments, the credit card company has the right to sue you. In fact, it’s almost inevitable that the company will sue you, given the heavy load credit card companies are carrying in this failing economy. They need every penny they can get to stay in business!

The lawsuit is usually filed by local collection law firms that deal with high-volume cases. You will be one of hundreds or thousands of people sued. Like you, these other consumers will be confused as to this turn of events and desperately want information on what to do next. Notice of this action is usually not mailed, but delivered by a process server. The “summons and complaint” will either be personally given to you or perhaps left at your front door.

To Sue or Not to Sue

Not all credit card companies will choose to file a lawsuit in the event of payment default. Therefore, the sudden decision to sue a consumer can come unexpectedly. It’s likely that a credit card company will consider all of the following before choosing to file a lawsuit:

  • How far behind is the borrower’s account?
  • Is there a co-signer that can take over the past due account?
  • How long has the borrower been working at the same job? (Making a case for wage garnishment)
  • How long has the borrower been paying on a home?
  • Is the borrower older or disabled? Or is he/she likely to work again?

As you can see, it’s mainly a question of responsibility. If you have generally favorable circumstances that would allow you to make minimum payments then you are considered more responsible for your debt and more at risk for a lawsuit.

Legal Entitlement of Credit Card Companies

If a credit card lawsuit is served to you, you made be left wondering if you should file for bankruptcy, hire a lawyer or leave the country entirely! (We would advise against the last option.) Remember that the burden of proof rests with the credit card company since it is acting as the plaintiff. Courts understand that default on credit card accounts is at an all time high and know that the average consumer can’t compete against high priced lawyers. Therefore, according to bankruptcy attorney Craig D. Robins, Esq, the credit card company is obligated to prove “that they are entitled to commence a lawsuit against you.”

The credit card company will have to provide evidence that:

  • You agreed to establish a credit card account with a signature.
  • You agreed to the terms of the account including principal charges, interest, default rate and other issues
  • That a default action has indeed taken place.

The credit card company must prove that you digitally or physically signed a document authorizing a new account. If they cannot produce this evidence, they may not have a case. The company must prove not only that you agreed to their terms but also that they did not alter the terms during the loan, which would not only null the agreement but also put them at risk of being seen as a predatory lender. The credit card company must clearly state the chance of altering terms at the outset of the contract and must send you copies of the new terms of agreement when it becomes official.

Finally, the credit card company must prove that default (or forfeiture of the terms) has occurred. A loan default occurs when a debtor has not met his or her legal obligations, as agreed upon in the original contract. This usually means that a scheduled payment or series of payments has been missed. The credit card company will customarily offer evidence of missed payment to the court. Therefore, if you plan to defend yourself in court, you must be sure that the company doesn’t have entitlement to a case, namely in the aforementioned three areas.

What to Do When the Credit Card Company Sues

First of all, don’t panic! You do have to legally take action once served with notice and within the stated number of days. Now is not the time to procrastinate or ignore the problem. If you fail to take any action then the court and creditor will consider your inaction basis for a default judgment against you. Harmless, right? Wrong. Attorney Craig D. Robins warns that a civil judgment can result in wage garnishment, liens on your property and frozen bank accounts. Worse yet, these blotches will not leave your public record for several years, even if you later file for bankruptcy.

You must answer the summons and then state whether or not you wish to dispute the case. This will at least prevent a default judgment from happening, even though you still have an ugly lawsuit on your hands. However, time is what you need right now. Time will give you further options including debt negotiation with the Credit Company or even debt consolidation solutions.

What about bankruptcy? The advantages of filing for bankruptcy include stopping harassment and stopping the lawsuit. For some consumers that have no legal defense and no hope of consolidation, this is the only option. However, even if this is your desired way out, remember that there are bankruptcy qualifications that you must meet.

Why do the credit card companies sue? In short, because in this day and age no one can afford to be short-changed. Whatever sum you owe the credit card companies is money that they are bound to lose. This is why it’s important to keep up your minimum payments and avoid getting into further debt if you can possibly avoid it. Being sued by a credit card company can be scary, but taking your financial obligations seriously and communicating with the lender can prevent this nightmarish scenario from happening.

Part of avoiding this whole situation is by applying for credits cards consciously and using them cautiously. If you are going to use credit cards to build your credit score or pay for items, then use a tool like the credit card “Chaser” to compare your options. This will allow you to shop around and compare cards to get the best interest rates possible. This is a great place to start in the responsible use of credit. You can use that free online tool to compare credit cards right now!

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Disclaimer: This content is not provided or commissioned by American Express, Visa, MasterCard, Discover, or any other credit card company or issuer. The opinions expressed here are the author's alone, not those of any credit card company or issuer, and have not been reviewed, approved or otherwise endorsed by any credit card company or issuer. Credit Card Chaser may be compensated through various affiliate programs with advertisers. As always, Credit Card Chaser is an independent website commmitted to helping people research credit card offers and find the best credit card!