Consumer Protection

What to Do if Your Credit Card Company Sues You

A summons is often the first notice people have that their credit card company is suing them.  They feel ambushed and trapped.  They have no idea what to do next.  This article is intended to give you some basic information about credit card law and to provide you with tools to fight a credit card lawsuit.  It also covers debts in collection and provides information and advice on dealing with collection agencies.

Both Federal Law and State Law Govern Credit Cards and Collection Agencies

Credit Cards

The Arizona statutes governing credit card transactions intersect with Federal statutes like the Truth in Lending Act and the Fair Credit Billing Act. The credit card company’s terms and conditions are reinforced by Arizona law.  Arizona Revised Statutes § 44-7802 states that by using a credit card, you are automatically agreeing to the terms and conditions set forth by the company.  That statute is followed by A.R.S. § 44-7803 which makes the consumer responsible for all charges and interest he and other authorized users make on the card.  This statute does have one consumer friendly statement: “In no case is a cardholder labile for any charges or interest that result from the unauthorized use of a credit card.”  In other words, if you use your credit card, you are automatically agreeing to the interest rate set by the company as well as the payment terms, amounts and time periods it sets.  But, if someone steals your credit card or credit card information and uses it, you are not responsible for the charges. 

The next statute, A.R.S. § 44-7804 deals directly with the topic of this article.  It says that if the credit card company sues you for unpaid charges and you do not contest the suit, the company can prove its case by showing the court the final bill it sent you.  Once it presents the bill to the court, the credit card company gets a judgment against you for the unpaid bill, interest, late charges and its court costs and attorneys’ fees.  The lesson here is to never ignore a summons and complaint.  You must respond and defend yourself.  We will discuss your options later.

Collection Agencies

Collection agencies are subject to the Federal Fair Debt Collection Practices Act which prohibits collection agencies from calling you multiple times a day or from calling early in the morning and late in the evening.  They are also prohibited from making threats or using foul language, nor can they discuss your debts with your employer or people other than your spouse.  However, collection agencies have long been notorious for skirting the law in their collection practices.  Despite the legal restrictions, they often badger and harass debtors in an effort to squeeze every dime from the distressed borrower. 

Banks and credit card companies normally handle their own collection efforts during the first 180 days after a bill becomes delinquent.  If they can’t collect in that time frame, they will usually sell the debt to a collection agency.  Once the bank sells the debt, it is out of the picture.  The bank can’t accept your payment because they no longer own the debt.   As everyone knows, debt in collection has a big impact on your credit score.  A single debt in collection can drop your score by 40 to 70 points.  Until 2016, that collection item would remain on your credit report for 7 years, even after you paid the account in full.  That changed in 2016, with FICO 9 being adopted by the consumer credit reporting agencies.  Now, collection items are removed from your credit report once they are paid in full.  Another change is that medical debt is treated differently than other debt.  Medical debt has less impact on your credit score.

Here are some tips for handling collection agencies:

1.  If you believe the debt is not yours, act immediately.  Within 30 days of the first collection effort, write the collection agency a letter stating the debt is not yours and deliver it by certified mail with return receipt requested.  Keep a copy and the return receipt for your records.  If a lawsuit is later filed, your copy and the receipt will be evidence that you properly notified the collection agency of its mistake.  You may think mistaken collection efforts are rare, that this won’t happen to you.  However, collection agencies target the wrong person more often than you would think.  All they care about is getting the money out of someone.  Right person, wrong person, they don’t care. 

A few years ago, my husband received a letter and phone calls from a collection agency seeking to recover on two bills owed to department stores.  The debts were not his.  The name on the credit account was the same as my husband’s but the date of birth and social security number did not match.  The debts were incurred in South Carolina.  My husband has never been to South Carolina and neither have I.  It’s possible the debts belonged to my husband’s estranged father.  They haven’t been in contact since my husband was a kid.  When we pointed out to the collection agent that the birth date and social security number listed on the account did not belong to either of us, the collection agent tried to convince us to pay the debt anyway.  My husband’s father was a bit of a reprobate and scam artist.  There was no way we wanted to pay his bills.  We handled the situation with a certified letter and the collection efforts stopped.  If you have a name similar to that of the actual debtor, that’s all it takes for you to be the recipient of a collection letter.  Do not ignore a collection notice because the debt isn’t yours.

2.  If the debt isn’t yours and collection efforts persist, complain in writing to the CFPB (Consumer Financial Protection Bureau).  You can find the complaint form online at 

3.  If the debt is yours and you know you owe it, the best advice is to pay the debt on the best terms you can negotiate.  By paying the debt while it is still in collection, you will avoid being stuck with court costs and attorneys’ fees.  You can avoid having your wages garnished and a 7 year black mark on your credit.  You can often negotiate to settle the debt for less than the full amount.  The collection agency paid the bank a fraction of the full amount to purchase the debt.  It may accept less than the full amount to settle the debt.

Handling a Lawsuit When the Credit Card Company or Collection Agency Sues

You Must File an Answer

A document called a “summons” may be your first notice that you are being sued.  Rule 4.1 of the Arizona Rules of Civil Procedure requires personal service of the summons and complaint.  A process server, sheriff, sheriff’s deputy or another person appointed by the court is required to serve a summons and complaint.  Service is proper when the process server hands you the documents or leaves them with another person at your residence.  If you receive a summons and complaint in the mail, it is not proper service. 

It is vital that you respond when you are served with a summons and complaint.  Do not ignore it and hope it will go away.  Ignoring a creditor’s lawsuit means the company will get a default judgment against you that includes court costs, interest and attorneys’ fees.  Even if you owe the money, you must respond because filing an answer can minimize the amount of the judgment against you.  If the creditor gets a default judgment against you, it will have new ways to collect its money.  The creditor will be able to garnish your wages and maybe even take money from your bank accounts. 

You must file your “answer” to the complaint within 20 days of the date you were served.  You must file in the court where you were sued.   (Rule 12, Arizona Rules of Civil Procedure).   Your answer can be simple, but it can’t simply be a statement that you can’t afford to pay.  If service was improper, include that in your answer.

Challenge the Creditor’s Standing to Bring Suit

“Standing” refers to the right to file the lawsuit.  By including a statement in your answer that the creditor lacks standing, you challenge its right to sue you.  To defend against your “standing” argument, the creditor will need to prove that it owns your debt. That may not be as easy as you might think.  Collection agencies buy debt in bulk.  That is, they purchase bundles of debt from banks and credit card companies.  Your debt is part of a bundle that may have been traded several times before the suit was filed.  The creditor probably has your debt on spreadsheets, but can it actually locate the sale documents proving it owns your specific debt?  In many cases, it can’t.  If you challenge standing and the creditor cannot produce the ownership documents, the case will be dismissed.

Make the Creditor Prove the Amount You Owe

In your answer, challenge the amount the creditor claims you owe.  Once again, to counter the challenge, the creditor will need to produce documentation from the original lender of the amount owed. Often, they are unable to locate those documents.  By the time the collection agency files suit, the original lender may have purged the relevant documents.

Raise the Statute of Limitations in Your Answer

In Arizona, the statute of limitations for breach of a written contract like a credit card agreement is 6 years.  (A.R.S. 12-548).  The time begins to run when the cause of action arises.  You must be very careful when you talk to collection agencies.  Admitting the debt is yours or making payments on old debt can start the statute of limitations all over again.  The statute of limitations on an open collections’ account is 3 years.  Creditors often file suit even if the statute of limitations has expired, hoping the debtor will ignore the summons and complaint and allow them to get a default judgment.  If you do not file an answer, there is no one to argue that the limitations period has passed, making the suit invalid.

If the Debt Does not Belong to You, File a Countersuit

If the debt is not yours and you have evidence to support your position, file a countersuit alleging malicious prosecution.  As mentioned earlier, your answer can be simple.  Something like: In answer to the plaintiff’s complaint, the defendant alleges the plaintiff has no standing to bring this lawsuit and has misrepresented the amount of the debt.   Add the statute of limitations defense and the countersuit if the circumstances warrant. 

By answering the complaint, you force the creditor to spend time and money on the lawsuit instead of getting the default judgment it hoped for.  Sometimes, they will make you a reasonable settlement offer rather than continue to fight.  If they don’t have the documents they need to prove ownership of the debt, they might back off altogether.

If the Creditor Files in Small Claims Court and you Lose, Appeal.

Any debt claim totaling $10,000 or less, not including interest, will be heard in small claims court.  Creditors love small claims court and usually will try to file there.  The justices of the peace and judges who handle cases in small claims court are accustomed to simple cases where the defendant doesn’t fight back.  Justices of the Peace are not required to be lawyers, and many lack depth of legal knowledge.  While most are fair and reasonable, you may encounter a small claims judge who ignores the evidence you present and grants judgment for the creditor.  If that happens and you believe the creditor lacks standing or hasn’t proven the amount of the debt, file an appeal to Superior Court.  You must file your “Notice of Appeal” in the small claims court.  In it you list your name and address, the case name and case number and describe your reasons for appeal.  The case will then be transferred to superior court in your county.

Chances are that if you can’t afford to pay the debt, you can’t afford to pay a lawyer to help you fight the lawsuit.  However, you can handle the defense on your own.  Keep it simple.  Stick to the issues and don’t go off on tangents.  If the debt belongs to another person and not you, you will be best served by hiring a lawyer to mount a malicious prosecution case against the creditor. 


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This website has been prepared for general information purposes only. The information on this website is not legal advice. Legal advice is dependent upon the specific circumstances of each situation. Also, the law may vary from state-to-state or county-to-county, so that some information in this website may not be correct for your situation. Finally, the information contained on this website is not guaranteed to be up to date. Therefore, the information contained in this website cannot replace the advice of competent legal counsel licensed in your jurisdiction.

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