Are you far behind on your credit card payments? You may be worried that your credit card company will sue you. This is a very real possibility, especially if you owe a large amount and haven’t made any payments for more than six months. But how often do credit card companies sue for non-payment, really?
The short answer: about 15% of the time. But whether or not your credit card company decides to sue you for non-payment depends on several factors. Read on to find out why credit card companies sue, what happens when they do, and what you can do if you’re facing a lawsuit for past-due debt.
The Credit Card Debt Collection Process
Credit card lawsuits don’t come out of nowhere. There’s a process that takes place over a few months first. Your credit card company will try various means to get you to pay up before suing. This is generally how it goes:
Late Fees Rack Up
When you miss a payment, you’ll be charged a late fee. The amount of the fee can vary, but it’s usually around $25 to $35.
Damage to Your Credit Report and Score
Missed payments will be reported to the credit bureaus after 30 days. Missing payments significantly damage your credit because “payment history” is the most heavily weighted factor in credit score calculations.
Increased Interest Rates
Interest charges will also continue to accumulate on your unpaid balance. Right now, the average rate is a hefty 21%. However, when you miss payments, your credit card company might charge you a penalty rate that’s even higher. (Think: around 29.99%.)
Charge-off
Your credit card company will continue to contact you and demand payment. But at some point, they may write-off your account as uncollectible (generally, between 120 and 180 days). This is known as a charge-off, meaning your account is closed and considered a loss. But that doesn’t mean you’re off the hook — you still legally owe the debt and they can still collect.
Collection Efforts
Your debt may be turned over to a debt buyer or collections agency, which will attempt to recover the amount you owe. This can include phone calls, letters, and even social media messages. Debt collectors may also contact family members and even your work to try and find you (but they cannot legally discuss the unpaid credit card debt with anyone but you and your spouse).
Legal Action
Finally, the credit card company or law firm based collections agency may take legal action to recover the debt. If they sue you and win, they can take further steps to collect what you owe. This can include wage garnishment, freezing your bank account, or putting a lien on your property.
How Often Do Credit Card Companies Sue for Non-Payment?
When a credit card company decides to sue for non-payment, it’s typically because other debt collection methods have failed, and they believe legal action is the most effective or last remaining way to attempt to recover the owed money. Often, this happens after 180 days of delinquency.
Lawsuits aren’t very common, but they do happen regularly. According to a Consumer Financial Protection Bureau (CFPB) report, credit card companies sue for non-payment in about one of every seven cases or nearly 15% of the time. The average litigated account balances ranged from $2,700 to $12,300.
Factors that Influence the Frequency of Lawsuits
When deciding whether or not to pursue a lawsuit for unpaid debt, credit card companies typically consider various factors. Here are some of the common considerations:
- Amount of debt. Larger amounts of debt are generally more likely to trigger legal action since the potential recovery is greater.
- Length of delinquency. The longer the debt has been outstanding, the more likely the credit card company may consider suing.
- Borrower responsiveness. A lawsuit might become more likely if you’ve been largely unresponsive to attempts to collect the debt or negotiate a repayment plan.
- Borrower’s financial situation. When deciding whether to sue, the credit card company might consider the borrower’s employment status, income, and overall financial situation. If the borrower has no assets and no income, the credit card company might decide that a lawsuit is not worth the effort or expense.
Credit card companies are more likely to pursue a lawsuit when the potential recovery justifies the cost of legal action. This is usually the case when the debt is significant, and the borrower has assets or income that could be used to repay the debt, and other collection efforts have failed, or the state where the debtor lives is more friendly to debt collection lawsuits.
What if my Debt Is Transferred to a Debt Collection Agency?
When credit card companies sell unpaid debt to a collection agency, the agency acquires the right to collect the debt and pursue collection through the courts.
In other words, the collection agency can sue you for the unpaid debt if it has the legal right to do so, depending on the agreement between the original creditor and the collection agency and the laws governing debt collection in your jurisdiction.
Again, before resorting to legal action, collection agencies will attempt to collect the debt through other means, such as letters or phone calls, and might even try to offer you a way to pay it through a payment plan or possible settlement offers.
Also, keep in mind that there’s a statute of limitations on debt collection lawsuits, which varies according to state law. If the statute of limitations on your credit card debt has expired, the collection agency no longer has the legal right to sue you. That said, you still owe the old debt, and they may still attempt to collect it and can still call you to pay it. This doesn’t mean that it’s off your record, either. Even if the debt has expired through the statute of limitations, the debt can still appear on your credit report.
Get Legal Help With a Credit Card Lawsuit
If you’re served with a credit card debt lawsuit, it’s important to take action immediately and get the best possible advice so you don’t end up with a judgment against you. That starts with researching the best debt help attorney or debt relief law firm that can help you file your answer to the lawsuit by the deadline. If you fail to respond or appear in court as required, the court can grant a default judgment in favor of the plaintiff (the credit card company or debt collection agency). This means you automatically lose the case and will owe the money legally.
It’s highly recommended that you work with an experienced debt relief attorney if a credit card company, MCA, or other business debt creditor sues you. A debt help attorney can assist you in navigating the legal process, ensure your rights are upheld, and determine the best course of action with the collection-related lawsuit. They may even be able to help you negotiate a debt settlement or alternative payment plan that keeps the matter out of court and saves you time and money.
Tayne Law Group, P.C. is a trusted source of legal advice and debt relief solutions. Contact our law firm today for a no-obligation, free phone consultation to learn more about our debt relief services and how we can help with your credit card debt lawsuits and other debt collection issues. Call us toll-free at (866) 890-7337 or fill out our short contact form. We never share or sell your information, and all conversations are confidential.
