Facts About Getting Sued by a Credit Card Company

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Facts About Getting Sued by a Credit Card Company
Facts About Getting Sued by a Credit Card Company (Image: Image, curtesy of Stock.xchng)

When you obtain a credit card, you agree to pay the card issuer the amount of any purchases you charge to the card and any additional interest that accrues while you maintain a balance. Unfortunately, you may fall behind on your monthly payments and the credit card company may threaten to sue you if you can't come to a mutual agreement on paying back the money. Fortunately, the odds of this happening are rare.

Significance

If the creditor sues you and obtains a legal judgment against you, the creditor has the right to legally garnish your wages but it is unlikely that a creditor will go to those lengths. On the other hand, it is almost certain that the card issuer will report your lack of payment to the three major credit reporting agencies, Equifax, Experian and Trans Union. This will lower your credit score and make future borrowing difficult.

Time Frame

Every state has its own statute of limitations that require a creditor to file a lawsuit against you before this period is up. Depending upon where you live, this could be a short as one year or as long as five years. When the statute of limitations is over, the credit card company may not file a suit.

Geography

Where you live is an important factor in determining whether a credit card issuer will sue you. The Fair Debt Collections Act requires creditors to file their suit in a court close to where you live. This often means a credit card company would have to hire an attorney in your county in order to sue you. Unless you owe a substantial amount or the card issuer is a local bank, it is unlikely the creditor will file a lawsuit.

Misconceptions

Although a credit card company can sue you, a collection agency cannot. Although it is illegal for collections agencies to engage in intimidation and threats, many of them do so anyway because the fee they incur for each reported infraction is often less than the amount of money they collect from their threats. If you receive threats from a collection agency, report them to the Federal Trade Commission (FTC). (See Resources)

Potential

There is a chance that a credit card company will agree to take less money than you owe them in exchange for removing the negative credit information from your credit report. If it is at all possible for you to pay the smaller amount, do so. However, request a letter in writing from the creditor, stating that they will remove the negative information upon receipt of your payment.

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