Amex Credit Card collection suits run the gamut

CREDITOR PROFILE

Credit and Charge Card Collection Suits on Amex Accounts

AMERICAN EXPRESS: TWO BANKS, A VARIETY OF CARD AND ACCOUNT TYPES

American Express cards come in several varieties. Not only are there personal cards and business cards, and several branded products (Green, Blue for Business, Gold, Rewards, etc), there are also two different issuing banks: American Express Centurion Bank, and American Express Bank, FSB.

Amex Centurion is a state-chartered Utah bank while American Express Bank, FSB is a federal savings bank, albeit one whose home state is Utah also. Affidavits filed on behalf of either Amex entity, however, typically come from the East Coast (New York or New Jersey) or from the West Coast (Ventura County), and some affiants even do them for both entities, claiming in both cases to be an assistant custodian of record of the financial institution appearing as plaintiff. American Express affiants whose signatures appear on summary judgment affidavits may be robosigners, but the affidavits are more difficult to challenge than those by debt buyers. Many contain much greater factual detail and also address the nature of the records and their reproduction from a data archive. The specific form and content of summary judgment affidavits apparently depends on which law firm handles the case. Amex uses several law firms in Texas, and they do not all litigate in the same manner.   

   

MULTIPLE LAW FIRMS THAT LITIGATE ON BEHALF OF AMERICAN EXPRESS IN TEXAS

Amex employs several different law firms to pursue collection of credit card debt through the courts in Texas: Among them:  MICHAEL J. ADAMS P.C.; JOHNSON & SILVER, LLP; DeGRASSE & ROLNICK; HENRY MCDONALD & JAMES, P.C.; SCHEINTHAL & KOUTS, L.L.P.;  ZWICKER &ASSOCIATES, P.C.. 

The most significant distinctions among these firms in their handling of Amex debt suits are (1) the quality of the summary judgment affidavits; (2) the  amount of documentation they attach to their motions for summary judgment (ranging from a single final statement to copies of statements running into hundreds of pages); and (3) whether they seek application of Utah law. (Adams routinely does so; Zwicker attorneys and most others typically do not; DeGrasse cites Utah law for the proposition that under that a credit card agreement need not be signed by the card holder (under that state's credit card exception in the statute of frauds that covers credit agreements generally).   
   
VOLUME OF CASES FILED BY AMERICAN EXPRESS

From August 2012 to August 2013 American Express entities (American Express Centurion Bank and American Express Bank, FSB) filed 385 cases in Harris County District Courts. Some of them are garnishment actions rather than original debt suit.
 
For the civil county courts at law of Harris County (of which there are four), a similar search yields 258 for the same time period (it includes 14 cases in which turnover relief was sought after Amex obtained a judgment).

   

TIMING OF AMEX LAWSUITS

  

It no longer takes very long after default for Amex to assign the account for litigation, and for a lawsuit to be actually filed.  At times, the last account statement will only be a few months older than the lawsuit itself, and sometimes the last statement has date printed on it that falls past the date the lawsuit was initiated. 

AMEX CARDMEMBER AGREEMENTS ARE DISTINCT

American Express form contracts are titled Cardmember Agreement, but they now look different from those of other creditors, and also differ in other respects. In the past, they were more similar to those from other issuers except for long and unwieldy titles such as Agreement Between One From American Express Cardmember and American Express Bank, FSB; or Agreement Between American Express Credit Cardmember and American Express Centurion Bank.”

 This is what Amex Centurion Bank Cardmember Agreements used to look like;

more recent versions are dated and have the account holder's name printed on them.

The more recent specimen of American Express Cardmember Agreements are no longer completely generic. They have the cardmember’s name, partial account number, and a date printed in the top margin. They consist of two components: Part 1 of 2 and Part 2 of 2.  All pages are consecutively numbered. There may also be a version code in fine print in the border of the pages, but since the cardmember’s name is printed on the first page, this is of lesser significance.

Business accounts often list two customers: an individual and a business, whether incorporated or not. When it files a collection suit, Amex may or may not name the business as a separate defendant. If the business is a sole proprietorship, there would be no reason under Texas law to do so, since such an entity is legally not separate from the owner. But sometimes the business is a business entity that has a legal existence separate and apart from the individual defendant, which raises the issue of who is liable and on what basis. 

When Amex sues both a natural person and a business, it will seek a judgment holding both liable for all amounts jointly and severally. It may be easier to mount a defense when there are two defendants, because it complicates the issue of proving contract formation without signature and may create an issue as to individual versus corporate liability (i.e., there may be an issue as to whether the natural person defendant is liable for business debt if it is clear that the business is a corporation, a PC, LLC, or PLLC). American Express attorneys will typically point to the cardmember agreement as the basis for contractual liability for both, rather than claiming that the individual is liable as a guarantor, a claim that would require compliance with the statute of frauds (at least under Texas law). 

In one case that made it all the way to the Texas Supreme Court, Amex filed a motion for default judgment against the corporate defendant, but made the mistake of drafting a proposed order that denied all other relief, including relief against the individual names as a defendant. The trial court signed the order. Amex did not mean to non-suit the second defendant, but by the time it discovered the drafting error, it was too late to correct the trial court's order nunc pro tunc, the highest court held in subsequent mandamus proceeding. 

CHOICE OF LAW AND ARBITRATION

All American Express cardmember agreements, whether old or new, have Utah choice of law clauses. They also contain arbitration provisions. Even though it may be more difficult to defend against an Amex debt suit, given that Amex sues as an original creditor and has its own business records available to make its case, arbitration can still be invoked as a defense to litigation. It may delay the inevitable, or facilitate settlement if Amex or its counsel is in no mood to go to arbitration.

Under the Federal Arbitration Act (FAA), arbitration agreements need not be signed as a condition for validity and enforceability, but under the Utah statute of frauds, the debt plaintiff suing on an unsigned credit contract must satisfy certain requirements to take advantage of the statutory exception for credit cards. This presumes that the court is asked to take judicial notice of, and asked to  apply, Utah law. It requires a motion under the applicable Texas rule. Some debt collection lawfirms (e.g. Adams) files such motions, others do not. But the option to ask for application of Utah law is not limited to attorneys for the plaintiff. 

Sample Utah choice of law clause (2008 Cardmember Agreement for Optima Card) 

Defense attorneys typically do not move for judicial notice and application of Utah law, but it can be done.  If neither party requests application of Utah law, the case will by default be resolved under Texas law (or the court will presume that Utah law is no different). In at least one respect, however, Utah law does differ somewhat, the applicability of the statute of frauds to loan contracts generally, and the specific requirements to take credit card account out of its reach. 

MODIFICATION OF TERMS

American Express often announces changes in terms by including notices to that effect on monthly statements, rather than in separate mailings that might later get lost. This puts its lawyers in a better position to argue that the terms were effectively changed (that an increase in the interest rate to 27.24% for example was properly implemented), at least in cases where the change-in-terms notification on a monthly statement was followed by account use in subsequent billing cycles, and thereby accepted by the cardholder -- > Modification of the terms of credit as an issue in defense of debt collection suits. 

THE UTAH STATUTE OF FRAUDS  

Texas only subjects certain loans to the statute of frauds. Credit card accounts are not covered even if the credit line exceeds $50,000. Utah, by contrast, has a statute of frauds for all loans, but it also created a work-around for credit card accounts. 

The exception under the Utah statue of frauds governing loans essentially codifies the common-law principles of contract-formation without a signature by requiring that the cardmember agreement be delivered to the consumer, that it contain language to the effect that card use will signify acceptance, and that it become binding upon such account use.

Therefore, the debt plaintiff cannot merely rely on the final account statement to support a credit card debt claim if that statement does not reflect account use, but merely carries forward a balance from the prior billing cycle. (Arguably such a sole statement would also be insufficient as proof of the balance because it is conclusory, given that it does not reveal – standing by itself – the derivation of the revolving balance).
 

To satisfy the first element of the credit card exception under the Utah statute of frauds, Amex would also have to present a summary judgment affidavit that adduces competent testimony that the attached Cardmember Agreement was mailed to the defendant when the account was opened. If the attached Cardmember Agreement is a superseding agreement on an older account, the Defendant’s counsel may argue – based on the discrepancy in dates – that it could not have been the original agreement when there is either a much earlier date quoted of account origination in the affidavit itself, or when the attached series of account statements (sometimes covering many billing cycles and running into more than 100 or 200 pages) reflects that the account is older than the date printed on the Cardmember Agreement.

In the latter scenario, summary judgment should be precluded either because of a fact issue as to the applicable agreement or for failure to prove up the original agreement and its subsequent modification by a superseding agreement that may contain different terms. If the original Agreement went missing, it cannot be known what terms it contained and which ones were modified. Additionally, if the date printed on the Agreement offered by Amex as the sole contract exhibit falls after the date of default, the default would have occurred under the terms of the agreement then in force, not the later agreement that Amex offers as an exhibit. Stated differently, the cardmember could not have breached an agreement that did not yet govern the account, and may not even have been finalized by Amex’s legal department yet.

Nor would an account history that evidences a prior default support the proposition that the post-dated agreement was accepted by account use. Indeed, the account may already have been closed at that time, and the last statement(s) may contain a notation to that effect. Occasionally, final statements surface as exhibits in Amex litigation that also contain other interesting messages: How about a bill that says it is not a bill?  

“This is not a bill” Disclaimers and their implications

 

Some final account statements filed in American Express credit card debt suits carry a note expressly stating that “This is not a bill.” Additional language typically refers the reader to a debt collection agent or agency for up-to-date account information. When this is the case, Defendant’s counsel may wish to make the following arguments: (1) that the purported statement should not be treated as a bill evidencing the status of the account because of the express disclaimer says it is not; and (2) that it should not be considered a demand for payment of the minimum payment due amount printed on the payment coupon, not to mention the entire revolving balance. If the statement does not qualify as a demand, it should not qualify as a presentment for attorney fee recovery purposes under Chapter 38 of the CPRC either. This is of course only of import when the Plaintiff seeks attorney’s fees. Not all of the above-mentioned law firms do.

OTHER MAJOR CREDIT CARD ISSUERS THAT SUE AS ORIGINAL CREDITORS

Bank of America (through FIA Card Services N.A., a wholly owned subsidiary headquartered in Delaware) 
Capital One Bank
Citibank, N.A. previously CitiBank (South Dakota) N.A. (prior to corporate reorganization) 
Discover Bank 
Wells Fargo Bank, National Association 
Target National Bank, now TD Bank, N.A.