Update on credit card case and arbitration

I continue to beat the debt collectors on third party credit card cases and on occasion, they end up paying us instead for violating the Fair Debt Collection Practices Act. I have yet to lose one of these cases.

These are not to be confused with lawsuits brought directly by the credit card companies themselves. While I can defend those, they are usually far more difficult.

Consistently, I have found that when the credit card debt has been purchased by a debt collector, the debt collector does not have the necessary admissible evidence to overcome my properly raised hearsay objections. Usually, the debt collector cannot prove that it actually owns the debt, or cannot prove the amount of the debt. It isn't for lack of trying or lack of bluster on their part. They invariably come forward with documents they claim prove their case. But these documents seldom meet the requirements for the business records exception to the hearsay rule.

Sometimes, these battles are hard fought, and other times they come relatively easy. For example, in the past few months, I had one credit card case in which the debt collector was about to go to trial. I got hired by the consumer at the last minute, soon before the pretrial hearing. The debt collector didn't show up. Whether that was because I had made an appearance, I can only speculate. Of course, the case was dismissed.

Another case had lingered for over a year. I had done my discovery and everything else I knew to defend the case and was simply waiting for the plaintiff to make a move. Then the debt collector simply dismissed the case out of the blue one day. Oddly enough, this case was brought by the credit card company and not a third party debt collector. Thus, they had access to the evidence they needed but just gave up, for reasons only known to them.

Strangely, the debt collectors who fight me the hardest are the ones who have the most rotten cases. I used to routinely see them drop these cases soon after I started defending them, but now they seem to want to fight. I don't know if this is a function of the economy or because they are getting tired of me beating them and think somehow they are going to school me. This is foolish on their part. You do not school your opponent by going to trial with your weakest case, unless you think it somehow schools your opponent by handing him an easy victory.

I have seen a drop in the number of cases they are filing past the statute of limitations deadline, but they're still doing it. It's a violation of the Fair Debt Collection Practices Act (FDCPA) for a debt collector to serve a lawsuit on a consumer for a consumer debt if the lawsuit was filed after the statute of limitations and the debt collector or their lawyers knew or should have know that it was past the statute of limitations.

In Texas, the statute of limitations is four years. Usually it is calculated from the date of the last payment, because that is the date of your last "dealing" with them. If it has been more than four years since your last payment and the time they file suit, you may have a FDCPA claim. If so, you may be able to recover statutory damages of $1,000 per suit, plus actual damages, attorney's fees and court costs. And of course, their claim against you should be completely barred by the statute of limitations. So, on these cases, they get nothing, my clients get some damages, and we can make them pay the attorney's fees.

You do, however, bear the burden of proof on the statute of limitations defense and the FDCPA. I am often asked how can we prove this defense? Well, your own testimony is proof, assuming you remember when you made your last payment. Your bank records are another source of proof. Your old credit card statements are another source.

Other times, we rely upon information provided by the plaintiffs. Incredibly, these plaintiffs sometimes state in the petition or its exhibits when the last payment was made. If that date was more than four years before they filed suit, they have a problem. In those instances, I strongly recommend to my clients to file a counter-claim for violation of the FDCPA. It is hard for them to claim they didn't know the debt was past the statute of limitations when you can tell it is just from reading the petition.

A growing trend in credit card debt collection is to file the claims with the National Arbitration Forum (NAF). A consumer group did a study and found that the debt collection and credit card industry wins those arbitrations about 94% of the time. The perception is that this is not a fair forum. This much I know. Its rules of procedure afford a defendant much less opportunity to defend his or her self than the defendant would have in a Texas state court. It is my perception that the arbitrators at the NAF will be much more lax about the rules of evidence than would be a Texas state judge.

Thus, the key to winning before the NAF is not to go there in the first place. Before consenting to arbitration before the NAF, the debtor should first determine whether he or she ever signed an arbitration agreement or otherwise agreed to arbitration.

Typically, credit card companies send consumers a notice of some kind informing them that if they continue to use the card, they are agreeing to arbitration. Or so the credit card companies claim. If the credit card company cannot prove that there was a binding, valid arbitration agreement, then the consumer can either file an objection to the arbitration with the NAF, or file a petition in state court to stay the arbitration.

Assuming you can afford the filing fee, I recommend filing a motion in state court and not just relying upon filing an objection to the arbitration forum itself. Why? Somehow, I don't expect the arbitrators with the NAF are going to side against themselves and rule there was no arbitration agreement. If they do that, they are biting the hand that feeds them.