The sheriff arrives at your door with papers, or, the mailman asks you to sign for a certified letter.  Uh oh, you have just been served with a credit card lawsuit.  What do you do now?  Let’s start with what you should NOT do… with number one on the list being: ignore the lawsuit.  You can’t pretend that you didn’t receive it, and you cannot hope that it will go away on its own, because it won’t. Number two, do not call the creditor.  This is a huge mistake that many people make.  You are not a negotiator, (well, chances are that you are not a negotiator) so you shouldn’t speak to the creditor (in addition, you might be better off defending the lawsuit than negotiating it).  Number three, do not call a debt settlement company.  As we have mentioned in other posts, every single debt reduction or debt settlement company that we have encountered has either been in a best case scenario a company that grossly overcharges and in a worst case scenario a complete scam.

So what do you do?  Call a consumer attorney.  For the life of me, I cannot figure out why this isn’t everyone’s first choice.  My office offers a free initial consultation on a credit card lawsuit, as do most other reputable consumer law firms.  Let an attorney who deals with this sort of issue on a daily basis review your lawsuit.  I will tell you if you should defend the case, negotiate, or take another action.  Certain cases should absolutely be defended, and others absolutely should be negotiated.  A good consumer attorney can usually make this judgment in a few short minutes.  Take the time and contact our office or the office of another consumer attorney if you are faced with a credit card lawsuit.  412-823-8003 or 1-888-536-6644 for a free consultation.

There has been a growing trend with the collection agencies towards filing their credit card lawsuits at the local magistrate or district justice.  My belief is that this is a cost savings measure on their part.  Statistics show that approximately 85% of the people who are sued by collection agencies on credit card debt do not defend themselves.  The cost savings for the collection agencies works like this:  At the DJ level, there is no hearing unless the defendant notifies the court that they intend to defend the case and would like a hearing.  In other words, if the plaintiff (collection agency) files a lawsuit at the local DJ, and the defendant fails to respond, then the DJ automatically enters judgment against the Defendant, without even having a hearing.  The plaintiff company does not need to send a representative/attorney to court in this instance.

Our best advise, obviously, is to have a consumer attorney representing your interests even at the district justice level, whether its our firm or another firm.  As we have mentioned in previous posts, collection agencies are rarely prepared to do battle at the district justice level and our chances of success are extremely high.  If you are facing a collection agency or credit card lawsuit, please contact our office at 412-823-8003 or 1-888-536-6644 for a free case review.

In previous posts, I have advised all of you to avoid Debt Settlement Companies like the plague.  In my experience, I have found that they either are outright scams, or, they simply charge way to much for the service that they provide.  Lately, we have found a new issue with a few of these companies and it has really been making me angry.  We are only 11 days in to this month, and I have already received 3 calls from potential clients who allowed a debt settlement companies to prepare or assist in preparing a response to a lawsuit.  In each case, I had to explain to the potential client that the responses that they allowed the debt settlement company to prepare were hurtful to their lawsuit.  All three of these clients likely would have won their lawsuits had they hired us from the start.  Unfortunately, they allowed these companies to prepare the responses, which were improper and/or inadequate, and which put the client in a disadvantaged position.  The sad part is that the responses were prepared by attorneys for the debt settlement company.  (Note: not any old attorney can prepare a response to a credit card lawsuit, and this is especially so when the attorney is not licensed in Pennsylvania). 

In each case, I had to advise the client that their case had been undermined by the inappropriate response of the out of state attorney that was retained by the debt settlement company.  It would now cost more in legal fees to try to correct or minimize the damage that had been done versus if they had hired us from the beginning.  The message here:  DO NOT LET A DEBT SETTLEMENT COMPANY ASSIST YOU IN PREPARING A RESPONSE TO A LAWSUIT.

Ms. W was sued by Atlantic Credit and Finance for approximately $9000.00 in Dauphin County.  Ms. W hired our firm to defend and we noticed right away that the lawsuit was defective. With a defective lawsuit in Pennsylvania, the proper response is typically to file Preliminary Objections. We won the first round of arguments on the objections, forcing Atlantic Credit to cure the defects that were present in the complaint.  I guess that I should say that we forced them to “try” to cure the defects. Atlantic filed an Amended Complaint and it was still very defective.  We responded with another set of Objections to the Complaint and after Argument, the judge threw the case out for failing to cure the defects.  The lawsuit was lacking in many areas.  It failed to include a signed application, a cardmember agreement, or any of the monthly account statements.

In a rare occurrence, the judge issued a written opinion on the case, which was reported by the courts. Typically, judges simply issue brief orders that either dismiss the case or move the case forward to trial.  The written opinion is issued where an issue continues to re-occur and the court wants to set a standard for all similar cases.  We are proud to have helped Ms. W and we are also very proud to have had a written opinion issued in our favor.  Until another opinion changes the law, our case is the standard for credit card cases in Dauphin County.

We recently had the pleasure of representing Virginia H on an Allegheny County credit card lawsuit.  Virginia was sued by Arrow Financial earlier this year.  She failed to respond to the lawsuit in time, and a default judgment was entered against her.  She called our office and after a quick review of the docket, we noticed that the Important Notice that was sent to her was defective in that it contained additional language.  (An Important Notice must be sent by the debt collector if you fail to respond to the lawsuit within 20 days.  This notice affords you an additional 10 days to respond).  We immediately filed a Motion to Strike the Judgment and argument was held before the Honorable Stanton R. Wettick.  Our argument was that the additional language that the debt collector added to the Important Notice was deceiving in that Virginia thought that a judgment had already been entered against her.  Judge Wettick agreed and struck the judgment.  Shortly thereafter,  the judge scheduled an Arbitration hearing and of course, we won as usual.  The reported opinion can be found at the Pittsburgh Legal Journal

This was a very good week for our firm.  We obtained 4 non-jury verdicts this week on credit card cases.  All of the cases commenced at the Arbitration level of the Court of Common Pleas of Allegheny County. We won all of the hearings at the Arbitration level, and the debt collectors filed appeals on all of the cases. The hearings on these appeals were heard this week and we won every single case! 

To be fair, its really not a suprise when we win a case, it happens so often, but 4 in one week is pretty good!

We hear this one all the time at our office. People call my office because they have been sued by collection agencies or junk debt buyers on old credit card accounts. I tell them that we can defend the case and most likely win. They often say “But, I owe the money” 

My response to that is no, you certainly don’t.  Most people do not realize this, but here’s how it works with a credit card account. You obtain a credit card from the original creditor.  Something happens and you lose your ability to pay so you go into default status. The original creditor waits up to 180 days and then charges off the account. (A charge off is simply an accounting term, it DOES NOT mean that you do not owe the money any longer). At this point, the original creditor has 2 choices.  The first is to try to collect from you by filing a lawsuit; The second is to sell the debt to a junk debt buyer or collection agency.  Often times, the original creditor chooses option 2.

When a credit card account is sold, it is sold not as an individual account, but rather, as part of a group of block of delinquent accounts. Typically, these accounts are sold for mere pennies on the dollar. A group of “good” bad debt (good defined as recently defaulted) may sell for 5 cents on the dollar. It can get sold again and again, each time at lower rates. We have seen instances where $1000 of debt has sold for .25. 

So the purchasing junk debt buyer or collection agency then files a lawsuit against you. This is where “but I owe the money” comes into play.  From my standpoint, you may owe the money to the original creditor at the time that you default. If they lend you money or extend credit to you, you do have an obligation to pay it back so you do “owe the money”. However, once you go into default and they charge it off, they have a choice to make. They can sue you or sell the account to a collection agency. If they sue, then maybe you do “owe  the money”.  But if they sell your account, then I don’t believe that you “owe the money” any longer.

Here is my reasoning. You have a credit account and are extended credit. You certainly owe the original creditor something at that point.  Once you go into default, you still “owe the money” to that creditor. I believe, however, that if they sell the account, then you no longer “owe the money” because they have received adequate compensation for you default. When they sell your account they are saying that they no longer want to deal with you and they would like to be compensated for the default. Collection Agency X comes along and gives the original creditor money for your account.  At that point, the original creditor is out of the picture. They have received what they deemed to be adequate and fair compensation for your default.  They would not have sold it otherwise, right?  So if the original creditor is adequately compensated, then you no longer “owe the money” in my opinion.

This isn’t to say that a legal interest such as a credit card account cannot be bought and sold.  Those transactions are certainly legal. I am simply looking at this from a debtor’s standpoint. If you pay anything to that collection agency, if you believe that you “owe the money” , you are simply paying pure profit to that collection agency. After all, they paid only pennies on the dollar for your account. After the first $30 or so, any money that you pay to them is pure profit.  Do you really “owe the money”?

I have encountered many people who have tried to defend credit card cases themselves in the past few months and am very surprised at some of the defenses that they think will work. The following are a few of the worst defenses that I have seen, and an explanation as to why they are such bad defenses.

I’ve never had an account with you.

This means absolutely nothing in a court of law. The right to sue someone is a legal interest. A legal interest can be sold, at any time, at any price, to anyone.  While it may be true that you did not have an account with the collection agency, that doesn’t mean that they cannot sue you on a delinquent account. (Whether they can prove that they bought the account is another story and is the basis for much of our success in defending collection agency lawsuits).

I tried to pay, but they wouldn’t work with me.

This may be the worst defense ever.   “I tried to pay…”  this is called an admission. Who pays on something that they do not owe?  No one.  The admission here is that you did have an account with someone and that you are in default on that account.  In a nutshell, it means that you lose your lawsuit. To be clear, once you are in default the creditor or collection agency does not have to accept any payment other than payment in full.  You do not get to set the terms of repayment.  Its not up to you to decide how much you can or are willing to pay. In addition, a court typically does not determine payment arrangements. Instead, a court determines if you owe anything and then how much. Repayment afterwards is up to the parties to handle.

My divorce decree says that I don’t have to pay.

This is mixing apples and doritos. A divorce decree or order is issued by a family court. While it has a binding effect between the spouses (ex spouse’s I should say) it does not bind other parties. The credit card company (or collection agency) is not bound by this divorce decree or order because its case is in civil court, which is different. The credit card company can sue the named cardholder only, not anyone else, and the divorce decree will not prevent that. What may happen is that the credit card company sues the cardholder and wins its case. The cardholder could then go to family court and have the other person found in contempt for not handling the account.

I hired a debt settlement company.

Perhaps the second worst defense, and, the absolute worst move that you could make, period. (This author firmly believes that debt settlement companies are useless and clearly not worth the outrageous fees that you pay them). As stated above, a credit card company or collection agency does not have to accept any payment other than payment in full, once you are in default. Debt settlement companies cannot stop lawsuits from occurring and are not equipped to help you respond to a credit card lawsuit. DO NOT TAKE LEGAL ADVICE FROM A DEBT SETTLEMENT COMPANY.  Again, don’t hire them to begin with and you won’t have to worry about heeding their legal advice.

Potential Client X sent an email to me today advising that she was in trouble.  She has several credit cards in default, so she hired a debt settlement company to assist her. (This is always a HUGE mistake as all debt settlement companies are either scams or not worth the exhorbitant fees that you pay them). The company is charging her 20% of her outstanding debt and have asked her to make monthly payments of $500 into their account. Because her total debt is about $40000, their fee is going to be $8000!  (I wish that I could charge that much, but my conscience doesn’t allow me to do that).  The best part (maybe the worst part) is that the company gets its money first.  The first 16 monthly payments go to the settlement company before they do any work.  Isn’t that just great!  Of course, all of the credit card companies are going to wait this out until the company gets its fee, right? 

The sad part, if it could get any sadder, is that the company told potential Client X that the credit card companies would not sue her because they were involved now. They mentioned that if a lawsuit did come, that they would take care of it.

Well, the lawsuit from Citibank did arrive. Potential Client X notified the company and they advised her that they would handle it.  They advised her to send an extra $125 per month to make payments to Citibank.  Potential Client X complied, only to find that while the funds did go to Citibank, the debt settlement company did not respond to the lawsuit and a judgment was entered against her for the full amount plus attorney fees. They told her that they thought Citibank would like to have 6 months of payments and then they would review her case, because ” that’s how they have handled things in the past”.

This entire fiasco could have been averted if Potential Client X had contact my office, or the office of another consumer attorney, rather than the debt settlement company.  Moral of the story, all debt settlement companies are a waste of your time and money.

Even if they get a reduction of 40%

We hear about unsavory collection agencies on a daily basis. They either make illegal threats, such as wage garnishment, pressing fraud charges or jail time, or, they harass you by calling you names like deadbeat, ignorant, loser and so forth.  Then, they contact your family and friends to try to get them to pay the debt for you, or, they contact your neighbors and employer with questions about the debt. 

All of the above actions are illegal under the Fair Debt Collection Practices Act. The Fair Debt Collection Practices Act (FDPCA for short) is a federal law that governs what a debt collector may do or say when it is attempting to collect a debt.

A debt collector may not threaten to take any action that is illegal, period. In the above examples, wage garnishment is a big one that we see quite often. To be clear, a debt collector may not garnish your wages in Pennsylvania for a credit card debt. There are no ifs, ands or buts to that statement. Therefore, if a debt collector makes such a threat, it is illegal and you may have a claim against them for their unfair practices.

Again, referring to the above examples, we hear of debt collectors who contact family, friends, employers and neighbors about outstanding debt. This type of activity is usually illegal, but not always.

To explain, generally, a debt collector may not speak with or contact anyone else about your debts. For the most part, an employer may never be contacted about a credit card debt. With regards to friends, family and neighbors, the same is true but with one general exception.

If a debt collector cannot find you, they may contact others to ascertain your location and contact information.  Again, they have this permission only if they cannot find you. They may not speak with others about the nature of their business, they may not tell anyone that you allegedly owe a debt.  Their sole purpose in contacting a friend, neighbor or family member can be only to locate you.  If the debt collector has a valid address and phone number for you, they have no reason or right to contact anyone else about your alleged debt.  Such an action would be illegal.

If one of the above examples should happen to you, please know that you have rights under the FDCPA. Our firm, specifically through my partner, Clay Morrow, can bring a claim against the debt collector for its illegal activities. Generally, you are entitled to a statutory damage amount $1000 AND you receive your reasonable attorney fees for prosecution of the claim. In that regard, we do not charge an up-front fee to pursue these claims on your behalf.

If a debt collector has threatened you, or discussed your alleged debt with someone else, please contact our office right away so that we can begin a claim for you.