Credit Card Lawsuit

Case Study: Credit Card Lawsuit

The Statute of Limitations & Credit Card Companies

In my experience as an attorney who handles both prosecution and defense of civil lawsuits, I’ve learned that there are only two kinds of defendants: those who think they must have done something wrong if they’re on the receiving end of a lawsuit, and those who will swear until the day they die that they did nothing wrong whatsoever. Creditors and debt collectors know this, and that’s why they like to pick on the elderly—because the older you get, the more likely it is that you’re the kind of defendant who automatically thinks you did something wrong to get sued. Kind of like when you’re driving and you see a cop behind you; you probably didn’t do anything wrong, but the fact that a cop is following you makes you wonder, right?

A lot of my clients are older folks who fall into that first category of defendants; they got sued and immediately think they’re in the wrong and that they have no legal defense. Now, to be fair, if you’re a defendant in any kind of lawsuit, chances are that you did something wrong. But that doesn’t mean you’re guilty—if everyone who ever got sued was automatically deemed guilty, then there would be no defense attorneys and the legal system would look a whole lot different!

One day early on in my career, the boss called me in to a consultation with a sweet older woman (the bad guys always seem to pick on the sweet little old lady). She had just been served with a lawsuit from a debt collector who was trying to collect over 40,000 dollars that was allegedly run up on a big box store credit card. Our poor client said that she owed the money because she gave the credit card to her adult son, who proceeded to run up the charges. What a wonderful son, huh? Unfortunately, while our client wanted to do the honorable thing and pay, she couldn’t afford to do so—she was retired, could not work due to poor health, had no savings, and had only her Social Security income, barely allowing her to get by (side note: go see a financial planner so you don’t end up like that, too). We told her we’d take her case pro bono, and I got to work seeing what I could do to help this poor woman.

Why Reviewing Contracts Matters

As the case was a breach of contract action, logically the first thing I did was thoroughly read the contract. Seems like a no-brainer, but you’d be surprised what kind of juicy tidbits go unnoticed in the fine print. In my review of the contract, I saw that it contained a “choice of law” provision, which is typical of credit card agreements. The choice of law provision clearly says what state law is to apply if a lawsuit has to be filed to enforce the agreement. That’s important, especially in credit card cases, because each state has different laws when it comes to credit cards. The state of Florida has laws that are much more liberally tailored to creditors as compared to other jurisdictions.

Fortunately, in reading the credit card contract, it stated that the law of a different state was to be used in the event of suit. I researched the law and found that the applicable statute of limitations—the specific law that gives a plaintiff an expiration date on its legal claims—allowed the debt collector in my case to file suit within three years after default. In reviewing the lawsuit, they had missed that deadline by several months, meaning they no longer had the ability to sue my client.

Upon finding this happy little nugget of information, I immediately filed defenses on behalf of my client, and further filed a counterclaim against the debt collector under the Fair Debt Collection Practices Act (FDCPA) saying that the lawsuit was an effort to collect debt that could no longer legally be taken due to expiration of the statute of limitations. Upon receiving the counterclaim, for several weeks, I heard nothing from the debt collector, and I can only assume that they did not take my claim seriously at that time.

However, slowly but surely, that began to change. About a month after getting the counterclaim, the debt collector’s attorney reached out to me to discuss settlement.

“Listen,” he said, “Your client owes the money. We don’t want to get into a big battle over this. If she pays us $30,000.00 right now, we can be done with the case. We’ll even give her a generous payment plan.” I laughed. My client had zero money, and she wouldn’t have paid even if she did, because the debt collector had missed its window to file suit and didn’t want to admit it. I told the attorney as such, and we proceeded with the case.

A few weeks later the attorney contacted me again.

“Listen,” he said, “We understand your client doesn’t have a lot of money, but she owes us and we don’t want this to get ugly. We’ll take $15,000.00 spread out over time, with no interest.” I laughed again. I told the attorney that he didn’t seem to be taking me seriously when I told him that my client had no money, and that the statute of limitations had expired. I reminded him that if the court agreed with me, not only would his client get no money, but it would have to pay my client her attorneys’ fees for pursing a claim that no longer existed.

Another week passed, and the attorney contacted me once again.

“Listen,” he said, “We get that your client is on Social Security and has no assets, and we couldn’t collect from her even if we got a judgment. So, we’re willing to do a walk-away. We’ll dismiss our case if you agree that everyone will pay their own attorneys’ fees and costs.” I laughed, harder than I had previously. I told the debt collector’s lawyer that he was free to dismiss his lawsuit, but that my counterclaim would live on, and I fully intended to pursue it on behalf of my client, because she had been wronged and deserved justice.

A Successful Resolution

To make a long story short, eventually the case settled. Not only did she not have to pay a dime of the $40k that the debt collector had sued her to collect, but they actually paid all of her attorneys’ fees and costs and put some money in her pocket, as well. It just goes to show you what a little legal acumen and a lot of tenacity can do. While not every case ends as well, I’m willing to bet there are a lot of cases out there just like this that never receive the proper attention to allow the tables to be turned against a debt collector. That’s why it’s so important to see an attorney when you’re served with a lawsuit, no matter the circumstances!

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