How Often Do Credit Card Companies Sue for Non-Payment?

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How Often Do Credit Card Companies Sue for Non-Payment?

Falling behind on credit card payments can be stressful. You may worry about getting calls from debt collectors or even getting sued. But how often do credit card companies actually take legal action over unpaid debts?The short answer is – not as much as you might think. According to the Consumer Financial Protection Bureau (CFPB), credit card companies sue in about 15% of debt collection cases. Let’s take a closer look at why and how often card issuers sue for non-payment.

The Debt Collection Process Before Lawsuits

Credit card companies don’t rush to sue right away when you miss a payment. First, they’ll try contacting you and offering options to catch up.Here’s a typical timeline:

30 days late: You’ll be charged a late fee, usually $25-35. The card issuer will send a past due notice.
60 days late: Your account may be sent to the card company’s internal collections department. You’ll get phone calls urging you to pay.
90 days late: Your credit score starts to drop as the delinquency is reported to credit bureaus. The card company continues collection efforts.
120 days late: Your account will likely get sent to a third-party collections agency. You’ll be contacted by phone and mail.
180 days late: At this point, the card issuer may charge off your account as a loss and sell the debt to a debt buyer. The new owner can sue you to collect.

So you can see, creditors and collectors typically spend months attempting to get borrowers to pay before resorting to lawsuits. But legal action does happen.

What Percentage of Credit Card Debt Collection Ends in Lawsuits?

According to the CFPB, about 15% of credit card debt collection cases lead to lawsuits. That means around 1 out of 7 people who fall behind on cards get taken to court.The CFPB also found that the average account balance involved in credit card lawsuits ranged from $2,700 to $12,300. So while card companies don’t sue everyone with unpaid debts, if you owe several thousand dollars, your chances of getting sued go up.

Factors That Increase Lawsuit Risk

Credit card companies weigh several factors when deciding whether or not to sue over non-payment:

Debt amount – Lawsuits are more likely for larger balances, like over $5,000. The potential payoff justifies the legal costs.
Payment history – If you’ve made no effort to pay at all, a lawsuit becomes more appealing to the creditor.
Your assets – Card issuers review your employment, income, home ownership, and assets. If you have means to repay through a court judgment, they’re more likely to sue.
Statute of limitations – This is the period of time creditors have to sue for unpaid debts. It varies by state. If the statute will soon expire, a suit is more likely.

So in general, you’re at higher risk of getting sued if you have substantial card debt, ignored collection efforts, and have assets or income the card company can pursue.

If Your Debt Gets Sold to a Collection Agency

When credit card companies give up on collecting internally, they often sell debts to third-party collection agencies. The agencies then have the right to continue collection efforts.Collection agencies can and do sue consumers for unpaid card debts they’ve purchased. In fact, debt buyers may be even more likely to sue than original creditors.The same general factors apply – the agency will review the debt amount, your ability to pay, and how soon the statute of limitations expires. Pay attention if an agency contacts you about old credit card debt and consider your options before things escalate to a lawsuit.

What to Do if You’re Sued for Credit Card Debt

Getting served with a lawsuit summons can be upsetting. Here are some tips on how to respond:

Get the details – Review the complaint and make sure the plaintiff has the right person and debt details. Mistakes happen.
Answer on time – You must respond to the lawsuit by the deadline stated or you’ll lose by default. An attorney can help craft your Answer.
Negotiate – Offering a lump sum settlement or repayment plan may stop the suit. Get any deals in writing.
Show up to court – If you ignore the court date, the creditor will win a default judgment against you.
Consider bankruptcy – If you have no way to repay right now, bankruptcy may be an option to discharge the debt.
Verify statute of limitations – If the statute has expired, the court may dismiss the suit. But you still owe the debt.

Getting legal help improves your chances of reaching a favorable outcome in a credit card debt collection lawsuit. Consult a consumer protection attorney about your options.

Key Takeaways

Credit card companies sue about 15% of customers with unpaid debts, according to the CFPB.
Lawsuits are more common for large balances over $5,000.
Your risk increases if you’ve made no effort to pay and have assets creditors can pursue.
If sued, seek legal help responding. You can negotiate a settlement or repayment plan.
Bankruptcy may discharge credit card debts you can’t afford to repay.

So in summary, there’s around a 1 in 7 chance of getting sued for defaulted credit card debt. But card companies won’t rush to court – they’ll make many attempts to collect first. If you do get sued, take it seriously. With the right legal guidance, you can often reach a reasonable outcome.