Thrifty Thinking: Credit Card Disputes

It was recently reported that various credit card companies are using nefarious tactics to recoup money lost to defaulted credit card balances, including falsifying documents and using incomplete records and generic court testimony, referred to as "robo-testimony." This situation is eerily reminiscent of the foreclosure process that plagued us last year. The product of these overaggressive debt collection practices is a record  number of lawsuits filed by consumers under the Fair Debt Collection Practices Act and the Fair Credit Reporting Act, which will hit 12,000 in 2012 matching 2011's record numbers.

Judges overseeing these cases are taking a hard stance against the credit companies games. John Ulzheimer, President of Consumer Education for SmartCredit.com has the following tips for consumers who find themselves embroiled in a credit card debt dispute:

• RESPOND TO THE LAWSUIT SUMMONS, NO MATTER WHAT: If consumers are sued by their credit card issuer and they know or strongly suspect that the debt is not theirs, has become time barred by state law, or the amount is incorrect they MUST respond to the lawsuit summons. If they do not respond, which they normally must do within 30 days from the filing of the lawsuit, they'll lose by default and won't have a chance to point out the document deficiencies in the credit card issuer's case.

• ASK THE COLLECTOR TO VERIFY THE DEBT: If you're being hounded by a debt collector ask them to verify the debt, which is your right under the Fair Debt Collection Practices Act. Just because you receive a demand to make payment doesn't mean you actually owe the amount they're asking for. Consumers tend to simply believe whatever the lender or collector sends them without doing their own due diligence. You have the right to ask the collector to verify the debt, which they then must do.

• BE PREPARED FOR A LONG BATTLE: Credit card issuers are notorious for discarding credit applications after just 2 years. This can result in a "my word versus yours" battle when it comes time to aggressively collect debts. Many times the lender is relying on old credit card receipts to determine who actually was using a card. It can be very unclear who actually owes a credit card debt. If you don't owe it, you shouldn't have to pay it.

• MAKE SURE THE COLLECTION AGENT IS PLAYING BY THE RULES: In many cases the creditor does have the correct consumer and the correct amount. But, that doesn't mean a collection attorney or credit card issuer doesn't have to follow the rules when it comes to collecting debts. Their problem is that they're so busy and want to collect these defaulted debts with as little investment as possible. That leads to cutting corners and in the world of debt collecting that gets you in trouble.

JOHN ULZHEIMER BIO
John Ulzheimer is a nationally recognized expert on credit reporting, credit scoring and identity theft. He is the President of Consumer Education at SmartCredit.com and the credit blogger for Mint.com. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. He has served as a credit expert witness in more than 100 cases and has been qualified to testify in both Federal and State court on the topic of consumer credit.