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According to data published by the Federal Reserve Bank of New York, credit card balances rose by $50 billion to $1.13 trillion over the last quarter of 2023. For many consumers, managing their debt can become challenging, with spiraling interest costs and eventual default on their loans. This can lead to legal action by credit card companies and the risk of their personal assets being seized in order to satisfy their outstanding debts.
If you have received a late payment notice, a notice of default or a formal summons outlining proposed legal action against you, it can be difficult to know how to proceed. While this can be a daunting experience it is reassuring to know you are not entirely powerless in this situation.
In this article, we will explore some key defenses consumers can employ when faced with legal action regarding credit card debt, helping them to navigate this challenge with greater confidence and clarity.
Improper Service of Summons and Complaint
Credit card companies are legally required to follow certain procedures when notifying consumers who have defaulted on their credit card loans. For instance, under South Africa’s National Credit Act, a s129 letter of demand must be issued to the consumer informing them of their default and the options that are available to them before legal proceedings will be taken.
In the U.S., consumers may be able to challenge legal action on the grounds that certain documents such as a summons and complaint were not served according to the legal requirements.
Statute of Limitations
Credit card companies must pursue legal action against a consumer who has defaulted on their credit card loan within a certain time frame as prescribed by the law. This time limit, known as the statute of limitations, typically ranges from three to six years, from the date the last loan payment was made.
The statute of limitations may vary according to the state and will prevent credit card companies from taking legal action beyond the stipulated time frame. If a credit card company has issued legal proceedings against you for defaulting on a credit card loan beyond the timeframe laid out by the statute of limitations you may have a defense against such action.
Fair Debt Collection Practices Act (FDCPA)
Under the FDCPA, collection agencies are prohibited from using any abusive, unfair or deceptive practices when collecting outstanding debts from consumers. For example, any threatening behavior or harassment toward a consumer will be considered a violation of this law. If a collection agency fails to comply with the FDCPA a consumer may be entitled to recover up to $1,000 in damages and repayment of any legal fees they may have incurred.
Lack of Standing
Credit card companies commonly sell their delinquent or ‘bad debts’ to third parties such as collection agencies. To successfully pursue consumers for their outstanding debts, these third parties must demonstrate they have the legal right to do so. If they cannot properly evidence that they are the rightful owner of your debt, you may have grounds to challenge their claims or dispute their action against you.
If you are concerned about an outstanding credit card debt, one or more of these defenses could apply to your situation.
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