Open account suit: a dubious basis for credit card debt collection

Can a credit card debt suit be brought as an open account?

Some courts of appeal in Texas, but not all, have held that a credit card debt suit can be brought as an open account suit. One court reasoned that “a credit card debt may be considered an open account because, under a credit card agreement, the terms of repayment remain subject to modification, and the parties exchange credits and debits until either party settles the balance and closes the account.”

The treatment of a credit card debt claim as an “open account” claim is, however, controversial, and is subject to serious disagreement because traditionally suits on account involved sales transactions. Additionally, there are numerous recent appellate opinions that expressly say that a credit card debt claim cannot be brought as a sworn account claim.

But a sworn account suit is merely a special form of common-law suit on account.  Numerous appellate opinions from various courts around Texas hold that a sworn account suit is not proper for the collection of a credit card (bank) debt because the creditor did not sell goods or services to the customer. That applies to credit card banks generally.

It is also well-established that a suit on sworn account under Rule 185 is not an independent cause of action, but merely a different way to plead a suit on account. Therefore, the substantive elements of a sworn account suit (which include underlying sales transactions) cannot logically be distinguished from a common-law suit on account. The difference is procedural and involves the form of the evidence necessary to establish the plaintiff's right to judgment.

Additionally, if the defendant in a sworn account suit files a sworn denial, the plaintiff loses the procedural and evidentiary benefits of bringing the suit under Rule 185 (sworn account rule), and must prove the essential elements of the suit on account in the traditional manner. One of those elements is the sale of goods or services.

Until the split of appellate authorities is resolved, the validity and viability of the open account theory is questionable.  Whether or not an open account suit will succeed independent of a breach-of-contract claim may well depend in which appellate district the lawsuit is filed, and whether the defendant challenges the theory in the trial court and on appeal, if there is one.

Courts of appeals often decline to consider an otherwise worthy legal argument (or basis for reversal) if it is not properly briefed. Even one of the appellate courts that approved the open account theory noted that the consumer had not argued that “open account” is the equivalent of “sworn account”, which the court recognized as being prohibited for credit card debt collection.