Defending against credit card lawsuits in Illinois can be challenging, primarily because the legal requirements to file such lawsuits are minimal. In my experience, at least 90% of all credit card lawsuits are nearly impossible to defend against because the complaints filed are legally sufficient, leaving little room for a successful defense. As a result, the likelihood of successfully defending against such a lawsuit is roughly 1 in 10.
However, exceptions exist where improper documentation or procedural errors can provide viable defenses. Unfortunately, many defendants, unaware of their rights or lacking legal counsel, allow judgments to be entered against them without opposition. This article explores common defenses and relevant case law applicable to credit card lawsuits in Illinois.
Initial Stages: Service of the Complaint
When a credit card company initiates a lawsuit, it files a complaint outlining its legal claims—typically alleging that the defendant failed to make required payments on the account. In Illinois, most complaints include causes of action such as Breach of Contract, Account Stated, and Implied Contract/Unjust Enrichment.
Small Claims Court for Debts Under $10,000
For credit card debts less than $10,000, the lawsuit may be filed in the small claims division, designed for simpler disputes with streamlined procedures leading to quicker resolutions. Creditors often prefer small claims court for its efficiency and cost-effectiveness. However, the legal principles and defenses available to defendants remain consistent with those in higher courts.
Service of Summons
Alongside the complaint, the court issues a summons—a formal notice requiring the defendant to appear in court. Service of the summons can be executed by the local sheriff or a private process server. If the creditor cannot locate the defendant, they may use service by publication, posting notice of the lawsuit in a newspaper for a designated period. This method can result in defendants being unaware of the lawsuit until facing consequences like a frozen bank accounts or wage garnishment.
Understanding Credit Card Agreements: Not Traditional Contracts
Contrary to common belief, credit card agreements are not traditional contracts in the conventional sense. A credit card represents an offer to extend credit rather than a binding contract established through mutual signatures. Applicants typically do not receive a signed copy of the agreement from the issuer, and there is often no “written contract” as traditionally defined.
Legal Perspective
Credit card debt arises from open-ended or revolving accounts, and Illinois courts, like many others, do not treat these agreements as traditional written contracts. The Illinois Credit Card Liability Act (815 ILCS 140/1) governs these agreements, and while they may be documented in writing, they differ from standard contracts, which require specific terms and signatures at the outset.
In Garber v. Harris Trust & Savings Bank, the court recognized that credit card agreements differ from typical written contracts, as they are based on terms provided by the issuer rather than mutual assent documented through signatures. Consequently, creditors are generally not required to attach a formal contract to the complaint when pursuing collection on credit card debt.
Common Defenses Against Credit Card Lawsuits
When facing a credit card lawsuit in Illinois, defendants may raise several legal defenses to challenge or dismiss the creditor’s claims. The following are common defenses based on statutory requirements, case law, and best practices:
1. Statute of Limitations
One of the most common defenses is the statute of limitations. In Illinois, the statute of limitations for credit card debt is generally five years under the Illinois Code of Civil Procedure (735 ILCS 5/13-205). This means that if the creditor has not filed a lawsuit within five years from the date of the last payment or the last use of the card, the case may be dismissed.
- Relevant Case Law: In Portfolio Acquisitions, LLC v. Feltman, the court ruled that the statute of limitations is a valid defense in cases where creditors attempt to collect after the statutory period has expired.
- Practical Tip: Defendants should review account records to determine the date of the last activity to assess if this defense applies.
2. Lack of Standing
Creditors, especially third-party debt collectors, must prove they have legal standing to sue the debtor. Illinois law 735 ILCS 5/2-403, requires that an assignee of a non-negotiable claim must sue in their own name and allege under oath that they are the bona fide owner of the debt. The plaintiff must specify when and how they acquired the debt, and the claim is subject to any defenses existing before the debtor was notified of the assignment.
Additionally, Illinois Supreme Court Rule 280.2 imposes further obligations on creditors, requiring them to provide specific documentation, including the charge-off statement and documents provided when the account was active. Failure to meet these requirements can result in dismissal for lack of standing.
- Practical Tip: Defendants should demand detailed documentation during discovery to challenge the creditor’s standing, ensuring compliance with statutory requirements and court rules.
3. Inaccurate Debt Amount
Defendants may challenge the accuracy of the debt amount claimed. Creditors sometimes add unauthorized fees, interest, or penalties. Defendants have the right to request an accounting of how the amount was calculated and dispute any inaccuracies.
- Practical Tip: Review past billing statements, account records and credit reports to identify discrepancies, and contest any unjustified charges.
4. Improper Assignment Documentation
Under 735 ILCS 5/2-606, if a claim is based on a written instrument, such as an assignment, the plaintiff must attach a copy to the complaint or provide a sworn affidavit explaining its absence. Credit card lawsuits may falter when debt buyers cannot adequately prove the validity of the assignment.
Creditors often rely on incomplete or vague documentation, which may not satisfy the burden of proof. For instance, a charge-off statement or a generic bill of sale without supporting documents—such as the original credit agreement or a complete chain of title—may be insufficient.
- Relevant Case Law: In Cach, LLC v. Moore, the court dismissed the lawsuit due to the plaintiff’s failure to provide essential documents like the purchase agreement or valid assignment. Illinois Supreme Court Rule 280.2(c) similarly requires creditors to furnish documentary evidence of the debt’s existence and terms, especially for charged-off accounts.
- Practical Tip: Scrutinize the documents attached to the complaint for completeness. If critical documentation is missing or incomplete, move to dismiss the case based on insufficient evidence.
5. Implied Contract and Unjust Enrichment
Creditors may assert that, absent a written contract, the debtor was unjustly enriched by receiving goods or services without payment. However, to succeed on an unjust enrichment claim, the plaintiff must prove that a direct benefit was conferred upon the debtor by the plaintiff—not merely by the original creditor.
In cases involving third-party debt collectors, this requirement is often unmet, as they did not provide the initial benefit. Unjust enrichment is an equitable claim that does not automatically transfer with legal assignments.
- Relevant Case Law: In Guinn v. Chevrolet the court ruled that an unjust enrichment claim cannot stand when an express contract governs the parties’ relationship. If a valid credit card agreement exists, it precludes an unjust enrichment claim.
- Practical Tip: Argue that no direct benefit was provided by the current creditor, and if a contract governs the relationship, the unjust enrichment claim should be dismissed.
6. Account Stated
Creditors may claim that an account stated exists, asserting that the defendant received billing statements and did not object to the amounts owed. However, Illinois law requires more than mere silence to establish an account stated; there must be an agreement between the parties regarding the correctness of the balance due.
Courts have held that simply sending monthly statements, without explicit acknowledgment or agreement from the defendant, may not constitute an account stated.
Possible Outcomes of a Credit Card Lawsuit
Winning the Case
Successfully defending against a credit card lawsuit can result in the court dismissing the case or issuing a judgment in the defendant’s favor. A dismissal may occur due to lack of evidence, procedural deficiencies, or the expiration of the statute of limitations. A judgment in favor signifies that the court finds the creditor’s claims invalid, relieving the defendant of the obligation to pay the disputed debt.
- Dismissal with Prejudice: Prevents the creditor from refiling the lawsuit on the same claim.
- Dismissal without Prejudice: Allows the creditor to correct errors and potentially refile the lawsuit.
Losing the Case
If the defendant loses, the court will enter a judgment against them, legally obligating payment of the debt.
- Enforcement Actions: The creditor may enforce the judgment through wage garnishment, bank account levies, or liens on property.
- Vacating the Judgment: The defendant may move to vacate the judgment under certain circumstances, such as improper service or newly discovered defenses.
Post-Judgment Options
- Settlement Negotiations: Even after a judgment, negotiating a settlement or payment plan with the creditor is possible.
- Appeals: Defendants may appeal the judgment based on legal errors made during the trial.
Other Considerations
Bankruptcy as a Defense
For individuals overwhelmed by debt, filing for bankruptcy may be a viable option. Bankruptcy can discharge unsecured debts, including credit card balances. A Chapter 7 bankruptcy, may eliminate most unsecured debts, while a Chapter 13 bankruptcy allows for reorganization and repayment over time.
- Automatic Stay: Filing for bankruptcy triggers an automatic stay, halting all collection actions and lawsuits.
- Consultation Advised: It is essential to consult a bankruptcy attorney to understand the implications fully.
Impact on Credit Report
A credit card lawsuit and any resulting judgment can adversely affect a defendant’s credit score. Lawsuits and judgments may appear on credit reports for up to seven years, complicating future credit or loan applications.
- Credit Recovery: Paying off the debt, even post-judgment, can positively influence credit reports. Responsible financial management over time can help rebuild credit.
- Professional Assistance: Seeking advice from a financial counselor can aid in developing a strategy for credit improvement.
Take Action Today: Consult with Attorney Steven Grace
Defending against credit card lawsuits in Illinois is a complex process that requires a thorough understanding of state laws and court procedures. While this guide provides valuable insights into potential defenses and legal strategies, every case is unique and may present specific challenges or opportunities. It is prudent to consult with an experienced attorney who can provide personalized advice tailored to your situation.
