Credit Card Authorized Users Hounded By Debt Collectors

Lets say that six months ago you had no credit whatsoever. Knowing that you needed to build a credit rating, you asked your friend to add you onto his credit card as an authorized user. The credit card company then began reporting his credit card history in your name as well as his. This established a credit report for you. Although the authorized user account didn't contribute to your credit score (it only does so if the authorized user is an immediate family member, such as a parent or spouse) it did create a stable credit history.

Fastforward three months and your best friend loses his job. He's using his credit card to make ends meet but eventually succumbs to the financial pressure and defaults on the card. The collection calls commence...and guess who they're calling?

YOU

They've called him, of course, but he has no job and no assets. You, on the other hand, are finally doing well for yourself and have a bit of extra money to tuck away each  month. Now the collection agency is threatening you with bad credit and – could it be? – a lawsuit if you don't pony up the cash to cover your friend's defaulted credit card bill.

But know this: Authorized users are not legally responsible for credit card debt the primary card holder incurs. Too many consumers are frightened by calls from bill collectors over debts they aren't even liable for. Don't let it happen to you. Send the collection agency a written notice informing the company that you are merely an authorized user on the account and, as such, are not responsible for the debt. Note that the company is violating the Fair Debt Collection Practices Act by informing you, a third party, of the primary account holder's debt. Demand that the collection agency never contact you again.

And if you haven't already, contact the credit card company and remove your status as an authorized user. The longer the account remains on your credit report, the worse the situation becomes.

How to Use an Affirmative Defense in a Collection Agency Lawsuit

If you've ever had the unfortunate experience of answering the telephone only to discover an angry debt collector on the line, you've probably faced the old, "Pay up or we'll sue" ultimatum. In reality, collection agencies rarely file a debt collection lawsuit unless the debt you owe exceeds $1000. Even then, the trouble of pursuing legal action over a delinquent debt is often more trouble than its worth for bill collectors.

While a lawsuit isn't likely, collection agencies do occasionally sue. If you receive a formal summons and complaint in the mail from a debt collector, you've been sued. Provided you play your cards right and present both the court and the collection agency with an affirmative defense, you may be successful in having the lawsuit dropped.

What is an Affirmative Defense?

An affirmative defense is any defense that stands regardless of if you actually owe the debt or not. For example, unsecured debts carry a statute of limitations. Debt collectors cannot legally file a lawsuit against you after the statute of limitations expires. Because most debtors aren't aware of the statute of limitations, its easy for debt collectors to file a lawsuit and walk away with a default judgment. Debt collection judgments are enforceable regardless of whether or not the collection agency followed the proper protocol when suing.

If a collection agency sues an informed debtor outside of the statute of limitations, however, and the debtor notes the statute of limitations as his defense, he has chosen an "affirmative" defense. Claiming an affirmative defense does not necessarily argue that you don't owe the debt but rather than the collector does not have the right to collect.

An expired statute of limitations is one type of affirmative defense.

Filing Your Affirmative Defense

You can't simply answer the summons and complaint, file a Notice of Appearance and show up in court with a surprise defense. If you plan to use an affirmative defense in court, you must include this fact and note which affirmative defense you're claiming when you file your answer. You must send the collection agency a copy of the answer you file with the court that notes your affirmative defense.

The Collection Agency May Drop Its Lawsuit

Debt collectors don't want to fight you in court. A collection agency's goal with a lawsuit is to obtain a default judgment from the court. The collection agency gets a default judgment if you do not respond to the lawsuit summons and complaint or file a Notice of Appearance noting your intention to appear in court. When you do not respond, the court assumes the collector's claim is valid and awards it a judgment by default. Responding and defending yourself against the debt collection lawsuit places the burden of proof on the creditor.

Collection agencies often lack the paperwork necessary to prove that you actually owe the debt they're suing over. When you respond to the lawsuit, the collection agency's job gets much more difficult. If you respond to the lawsuit with an affirmative defense, however, its unlikely that the collection agency will be able to win its case – even if the fact that you owe the debt isn't in question.

In order to minimize the company's financial losses, a debt collection agency will often drops its lawsuit after receiving notice of your affirmative defense. This prevents the company from having to shoulder the burden of further court costs and attorney fees for a case it stands a high chance of losing. 

Related Posts:

How to Respond to a Bill Collector's Lawsuit

Beware a Discover Card Lawsuit

How Collection Agency Debt Can Turn Into a Default Judgment  

Can Collection Agency Take My Tax Refund?

If you're one of the many lucky Americans who receive a tax refund at the end of the year, the last thing you want to have to worry about is having your refund snatched away from you by bill collectors. Unfortunately, if you owe debt to a collection agency and the collection agency has a judgment against you, losing your tax refund is a very real possibility. If you know your tax refund is at risk of being seized, there are steps you can take to protect your money and prevent collectors from garnishing your federal and state tax refund money.

Tax Refunds Exempt From Garnishment

Collection agencies love garnishment because it provides them with a way to recover unpaid debts without having to rely on the debtor to send in a payment each month. Garnishment ensures that payments arrive on time each and every month until the debt is paid in full.

Certain types of income, such as disability, unemployment, child support, etc. are all exempt for collection purposes. Collection agencies can neither garnish these or levy them directly from your bank account. Your tax refund is a special case, however. While debt collectors cannot garnish your tax refund from the IRS before its sent your way, once you deposit it into your bank account it becomes fair game for judgment creditors to seize.

Government Debt Collection

I can't bring up tax refunds and claim that creditors cannot garnish them when there is one glaring exception to this rule – the government. If you owe back taxes or unpaid student loans, rest assured your tax refund will either be garnished or withheld in its entirety.

You see, its entirely too much trouble for the IRS to work with commercial creditors in order to facilitate garnishment of tax refund money. Your right to your full tax refund, even if a creditor holds a judgment against you, isn't a way for the government to ensure that you have the money you need. It's merely inconvenient for the IRS to permit creditors to garnish tax refunds before they are sent out.

How do I know this? All other forms of income that are exempt from garnishment are exempt due to a special status as a "benefit" (usually, but not always, a federal one). These benefits are exempt from both types of garnishment. Your tax refund is not a benefit of any sort. It's your money. It was always your money. You just used it to pay your taxes. It's no more exempt from seizure than money you receive when you return an item to a department store.

Protecting Your Tax Refund From Seizure

Because debt collectors cannot garnish your tax refund directly from the IRS, you should receive your full refund. Provided you cash your refund rather than depositing it into your bank account, debt collectors – even those with a judgment against you – will not be able to touch it.

Get your tax refund on a pre-paid Visa card.

One thing to remember: If you are e-filing, request that the IRS mail you your refund via a check or prepaid Visa card (yes, they do that. Cool, huh?) rather than using direct deposit to deposit the money into your checking or savings account. While direct deposit is much faster than getting your refund through the mail, its also much safer and less stressful than waiting with baited breath for your refund to clear before racing to the bank to withdraw it before the collection agency can freeze your bank account.


Related Posts:

Funds Exempt From Bank Account Garnishment

Make Yourself Judgment Proof

Checking Account Garnishment