What to Know About Credit Card Companies That Sue

Credit card debt is a widespread financial concern. Average credit card debt per person is around $6,434, with households carrying about $9,144. Total U.S. credit card debt exceeds $1 trillion, showing significant reliance on credit. This debt can lead to financial strain, and the prospect of a credit card company pursuing legal action is a concern. Understanding these circumstances is important.

Factors Leading to Credit Card Lawsuits

Credit card companies typically pursue legal action after other collection attempts fail. Lawsuits are often considered when an account is past due for 180 days or more. At this point, the account is usually “charged off,” meaning it’s removed from active receivables and considered uncollectible for accounting. The debt remains legally owed.

The outstanding balance also plays a role. Creditors are more likely to sue for larger debts, as potential recovery justifies litigation costs. Credit card debt is frequently litigated, especially for balances over $1,000, due to streamlined legal processes. Borrower responsiveness to collection efforts also influences a creditor’s decision.

Identifying Creditors That Sue

Understanding which entities are more inclined to file lawsuits involves observing general patterns. Broadly, two main categories of creditors engage in litigation: original creditors and debt buyers. Original creditors, like large banks, may sue for higher balances to recover losses. Their legal departments or retained law firms handle these cases, especially for substantial debts.

Debt buyers acquire delinquent accounts from original creditors, often for a small percentage of the debt’s value. For these entities, litigation can be a primary collection strategy, especially for accounts that resisted other methods. Their business model relies on recovering purchased debt through legal means. While both types of entities may sue, their motivations and the scale of the debts they pursue can differ.

Consumers can gain insight into these trends by researching publicly available information. Court records, often accessible online, reveal patterns of lawsuit filings. Searching these databases for names of large financial institutions or prominent debt buying companies can show how frequently they appear as plaintiffs in debt collection cases. Consumer complaint databases from governmental agencies also offer insights into collection practices, including legal actions.

Overview of a Credit Card Lawsuit

When a credit card company or debt buyer pursues legal action, the process begins with filing a lawsuit in civil court. The defendant is then formally notified through a summons and complaint. The summons informs the defendant they are being sued and specifies the response deadline. The complaint outlines the creditor’s allegations, detailing the amount owed and the claim’s basis.

Responding to the summons and complaint within the specified timeframe, typically 20 to 30 days, is important. Failure to respond by the deadline can result in a default judgment, where the court rules in favor of the plaintiff (creditor) without a trial, granting them the right to collect the debt. These lawsuits are generally heard in civil courts, which handle disputes and can range from small claims to higher district courts, depending on the debt amount.

Actions After a Lawsuit Judgment

After a creditor obtains a judgment, they gain legal tools to enforce debt collection. The judgment transforms the creditor into a judgment creditor, allowing various post-judgment collection methods. One common method is wage garnishment, where a court order directs an employer to withhold a portion of wages and send them to the judgment creditor. Federal law limits how much disposable earnings can be garnished for private debts, such as credit card debt. These limits are typically based on a percentage of disposable earnings or a multiple of the federal minimum wage.

Another tool is a bank account levy, allowing the judgment creditor to seize funds directly from bank accounts. This requires a court order presented to the bank, which then freezes and releases the specified amount. Judgment creditors may also place a property lien on real estate. A property lien does not immediately seize the property but creates a legal claim, often requiring debt satisfaction before the property can be sold or refinanced. These actions are executed through court orders, requiring specific legal procedures. A judgment is typically valid for 10 years, and some states allow for renewal, extending the period during which the debt can be collected.