HSBC Bank Nevada, National Association, Las Vegas, Nevada (“HSBC Nevada”) - No longer in existence

CREDIT CARD DEBT SUITS  BASED ON 
ACCOUNTS OF HSBC BANK NEVADA, N.A.

HSBC BANK NEVADA, N.A. was a national bank that has since ceased to exist. It issued various private label and co-branded cards, including Best Buy and Metris. Its portfolio also included accounts issued in the name of DIRECT MERCHANTS BANK.
 
Claims based on charged-off accounts of this nature are typically brought by debt buyers, such as NCEP, LLC; PORTFOLIO RECOVERY ASSOCIATES, LLC ("PRA"); CAVALRY SPV I, LLL (as assignee of EQUABLE ASCENT FINANCIAL, LLC); MIDLAND FUNDING, LLC; and MAIN STREET ACQUISITION CORP.
 
Attorneys for these debt buyers often do not produce a cardmember agreement to establish the contractual foundation of their claim. Other documentation is often also of poor quality. Sometimes they submit an application for a credit card, and pretend that the application is the contract, even if the application makes it clear that it may or may not be granted, and states that the cardholder agreement will be sent with the card (assuming the application is approved). In many of these debt collection cases, the documentation of the portfolio transfers is often of very dubious character also. There is frequently no specific evidence to demonstrate that the particular account on which the debt collection attorney sues was part of the portfolio to which the bill of sale or other form of assignment document pertains. One-page bills of sale typically refer to other documents (such as exhibits, schedules, and contracts) and the information contained in such other documents, but these other documents are typically not attached, and therefore are not before the court for evidentiary purposes.

HSBC BANK NEVADA, N.A.'s active credit card portfolio was acquired by Capital One Bank, National Association, McLean, Virginia and Capital One Bank (USA), National Association, Glen Allen, Virginia in a 2011 asset purchase transaction, with regulatory approval granted in 2012. Defaulted account were apparently also part of the transaction, which arguably makes Capital One a debt collector, as opposed to a creditor, under the FDCPA, when it attempts to collect on such accounts. But there may be reasonable grounds for legitimate disagreement on the matter, particularly in cases when it is not clear, or not clear initially without the benefit of discovery, what that status of the the particular account was at the time of the portfolio sale transaction.

HSBC BANK NEVADA, N.A subsequently merged with its corporate parent and its charter under the National Bank Act was surrendered to the OCC. As a result, the bank no longer exists.

EXCERPT FROM APPLICATION FOR REGULATORY APPROVAL
FOR HSBC-CAPITAL ONE DEAL FOR SALE OF CREDIT CARD BUSINESS

HSBC - CAPITAL ONE DEAL - TRANSACTION SUMMARY
(click image to enlarge)

HSBC BANK NEVADA, NATIONAL ASSOCIATION - BACKGROUND 

HSBC Nevada was chartered in 1993 under the Competitive Equality Banking Act (“CEBA”).

A CEBA bank is not a “bank” for purposes of the Bank Holding Company Act if it engages “only in credit card operations” and is restricted by statutory provisions from competing with retail banks by limiting its deposit taking and lending activities. Under CEBA, HSBC Nevada could not make any loans outside of its credit card operations, including commercial loans, farm loans, or community development loans. In addition, HSBC Nevada applied for, and received, a limited purpose designation under the CRA on February 1, 1996. A limited purpose bank is a bank that offers only a narrow product line to a regional or broader market and for which a designation of limited purpose bank is in effect.

HSBC Bank Nevada, National Association, Las Vegas, Nevada ceased to exist when it merged into HSBC Finance Corporation, Mettawa, Illinois (“HBIO”), its non-bank parent corporation incorporated under Delaware Law, pursuant to 12 U.S.C. § 215a-3. 1 As a result of the merger, HSBC Nevada’s corporate existence ended and its charter was surrendered to the OCC.

 FDIC information on HSBC-related financial institutions in the U.S.

The Bank Holding Company is HSBC HOLDINGS PLC (based in London)

U.S. Bank National Association ND ("US Bank NA ND") Credit Cards

U.S. Bank, National Association, ND is a North Dakota based bank that is part of a family of financial services firms with similar names. It is an issuer of credit cards, which include private label cards. 

Defaulted accounts are sold to debt buyers such as  CACH, LLC and Converging Capital LLC, which sue on such accounts in Texas. Among the attorneys handling such accounts are Richard E. Clark; Jody D. Jenkins, and Dan G. Young. 


EXCERPTS FROM A US BANK NA CARD MEMBER AGREEMENT (2008)

Choice of Law Clause: North Dakota

Reservation of Rights clause with respect to future amendments of terms

Arbitration Provisions 

Default provision - Defined events of default: The obvious one (nonpayment) and some rather vague and subjective ones

Delinquency Interest: Contractual authorization of penalty pricing 

ADDRESSES incl. PAYMENT ADDRESS FOR US BANK CARDS: 

U.S. Bank
P.O. Box 790408
St. Louis, MO 63179-0408

U.S. Bank National Association ND
P. O. Box 2066
Milwaukee, WI 53201-2066

OCC LISTING FOR US BANK AND SIMILARLY-NAMED NATIONAL BANKS 

OTHER US BANK COMPANIES (per privacy policy statement in CMA from 2008)

Wells Fargo Bank lawsuits on credit cards in Texas courts

ORIGINAL CREDITOR PROFILE: 

WELLS FARGO BANK, N.A. 

Wells Fargo Bank, N.A. is a major national bank headquartered in Sioux Falls, South Dakota. It is a prolific litigator in Texas courts. In Harris County, for example, a party search on the district clerk’s website yields more than 3000 cases filed in the county's civil district courts. A large proportion of these, however, are foreclosure cases, and some are garnishment cases that are docketed separately even though they arise from a previous lawsuit. 

This post will focus on credit card debt suit involving cards issued by Wells Fargo Bank, N.A. (“Wells Fargo” or “WFBNA”). It should be noted, however, that Wells Fargo also sues on Personal Loan Agreements, and that those lawsuits have a number of distinct characteristics. For one, the underlying contract and TILA disclosures look different. As is true of other major banks, there are other entities with similar sounding names. See FDIC listing below.    

WELLS FARGO COLLECTS ITS OWN DEBT

Like Discover Bank and American Express, Wells Fargo sues as original creditor to collect money owed on defaulted credit card accounts (rather than selling them off to debt buyers, a practice Chase Bank USA, N.A. is known for). Wells Fargo utilizes one major lawfirm to sue customers in Texas: VINCENT LOPEZ SERAFINO JENEVEIN, P.C. ("VINCENT"). Mark Rechner and Thomas Sellers are the attorneys on the pleadings.

WELLS FARGO CREDIT CARD AGREEMENTS

Wells Fargo cardmember agreements (which the bank calls customer agreements) are extremely verbose. A pro se litigant who appealed an adverse judgment recently complained that she could not make sense of it even though she had a college degree and other people of similar level of education could not understand it either. Card agreements, of course, are written by lawyers for other lawyers, especially the select number of lawyers known as judges. After all, banks want to make sure they win if they are sued by aggravated customers, not to mention hordes of them being rounded up for a class action. Cardmember agreements are carefully drafted, so as to give as much leverage to the creditor, but to also hold up in count. 

Wells Fargo, of course, might disagree, and point to the section of the contract that even offers translated versions in various languages as proof that it is very customer-oriented. -- > Bank documents in Spanish and other foreign languages. 

That said, once a WFB cardmember agreement becomes an exhibit in litigation, it offers a convenience factor that somewhat compensates for the excessive length: the sections are numbered, thus making it easier to reference them, if necessary to support an argument by the defense. Other CMAs, but contrast, are much harder to deal with, and are often not even legible because the font of the fine print is too small, and the quality of the reproduction poor. Chase and HSBC argreements are notorious for this problem. 

Wells Fargo Cardmember Agreement: Two Parts

A standard Wells Fargo credit card contract actually consists of the multiple parts: The cardmember agreement proper, which has the unwieldy title "CONSUMER CREDIT CARD CUSTOMER AGREEMENT & DISCLOSURE STATEMENT VISA® OR MASTERCARD®" (“Customer Agreement”), and an additional credit terms document that contains TILA disclosures and is referred to as "Important Terms Of Your Credit Card Account" (“Terms Document”), which is found on the enclosed letter/card carrier. A third component is also mentioned: any subsequent disclosures, but, depending on the age of the account by the time it went into default, there may not have been any such supplemental change notices. All accounts must have the additional Terms Document, however, because that document contains the credit terms that federal law requires to be set forth in writing when the account is opened, and the Wells Fargo customer agreements do not contain all of the material terms. -- > Truth in Lending Act (TILA) Disclosures 

The division of the contract into two components makes sense. The Customer Agreement is generic and covers a large segment of the customer base (possibly even all of them at a particular point in time), while the Terms Document will vary across the population of customers as it will reflect differential pricing (higher or lower interest rates and other terms) for individual segments reflecting different cardholders' creditworthiness and credit utilization patterns. The industry calls this risk-based pricing, but risk-management is not the only reason. Banks want to maximize profits by charging interest rates as high as the market (customers) will bear.   

What happened with the Terms Document? (TILA Disclosures)

The first paragraph of the Customer Agreement incorporates the Terms Document by reference, but the Terms Document itself is typically omitted when Wells Fargo moves for summary judgment. Counsel for the Defendant may thus want to point out to the court that the plaintiff has failed to prove up the essential terms of the contract, and cite the Williams v. Unifund case in support. The argument may not always carry the day, but it is legally sound under existing case law, and worth making. 

Choice of law: SD

Although Wells Fargo Bank is associated with the West Coast, the contractual choice of law in its Customer Agreements is South Dakota. WFBNA moved its headquarters from SAN FRANCISCO, CA to SIOUX FALLS, SD in 2004. Other Wells Fargo entities are located elsewhere, including one in Texas. See FDIC list at the bottom of this page. The reason major national banks choose South Dakota is the favorable legal climate there: No limits on interest rates that may be contracted for. Citicorp, based in New York, did the same thing, and is running its credit card operation out of South Dakota through Citibank, N.A., and previously Citibank (South Dakota) N.A..  

The Wells Fargo choice-of-law paragraph states as follows: 

This Agreement and your account, as well as our rights and duties and your rights and duties regarding this Agreement and your account, will be governed by and interpreted in accordance with the laws of the United States and, to the extent applicable, the law of the State of South Dakota, regardless of where you reside or use your account at any time.

Arbitration clauses 

Wells Fargo credit card agreements contain arbitration provisions for arbitration under the FAA, though South Dakota law is also mentioned. Under the terms of the arbitration agreement, either the customer or the bank may submit a dispute to binding arbitration at any time notwithstanding that a lawsuit or other proceeding has been previously commenced. 

This clause allows WFBNA to opt for arbitration when the customer answers the debt suit with a counterclaim; or to quash a lawsuit when sued by a consumer independently, but it also allows the cardholder to assert the arbitration provisions as a defense in a debt collection suit brought by the bank against him or her.  -- > Invoking arbitration agreement whensued for credit card debt. 

This is what a typical arb agreement looks like:

Billing Disputes

Disputes about charges on account statements are handled through Wells Fargo Card Service with a PO address in Des Moines, Iowa.

Payments, however, must be sent to a different address for the same entity in Los Angeles, California.

 

TYPICAL ORIGINAL PETITION IN A WELLS FARGO SUIT ON CREDIT CARD ACCOUNT

In Texas, debt collection suits involving Wells Fargo credit card accounts are filed by VINCENT LOPEZ SERAFINO JENEVEIN, P.C., a lawfirm based in Dallas.

The standard VINCENT pleading typically ignores the choice-of-law issue, and invokes theories of recovery which are not even viable for collection of a credit card debt (which requires written credit terms under federal and state laws regulating the banking sector). 
  
Those theories are unjust enrichment and money had and received, but Wells Fargo's attorney does not move for summary judgment on those theories. Therefore; it is not worth complaining about them.  -- > equitable theories; -- > express contract preclusion of equitable claims; -- > special exceptions to challenge the opponent's pleadings

Legal fees in addition to the amount claimed as due on the account 

Attorney’s fees are typically also requested in petitions filed by VINCENT, based on a Texas statute, rather than a South Dakota one. The amount sought in the trial courts is typically moderate (less than $1,000), but much higher contingent attorney’s fees are requested should the consumer unsuccessfully appeal an adverse judgment ($5000 for each level of appeal). -- > Comparison of attorney fees claims in debt collection suits 

SUMMARY JUDGMENT MOTIONS FILED IN WELLS FARGO CREDIT CARD ACTIONS

WFBNA attorney Mark Rechner of VINCENT LOPEZ SERAFINO JENEVEIN, P.C., typically moves for summary judgment with an affidavit of a Wells Fargo representative located in Iowa (e.g., Jessica Rogers, Melissa J. Blair,Mandy E.L. Wagner); a copy of a CONSUMER CREDIT CARD CUSTOMER AGREEMENT & DISCLOSURES STATEMENT (see description above); and a few monthly account statements. There is no bill of sale as they appear in suits by assignees such as Midland Funding, LLC or CACH, LLC because WFBNA sues itself as original creditor on defaulted accounts (although there are exceptions). -- > Lawsuits by assignees on Wells Fargo bank debt 

The affidavit, which also functions as a business records affidavit, will normally recite the date of account creation, but the Customer Agreement will typically be of much more recent vintage (e.g., 2010). Typically, the TILA Disclosure document (the Terms Document as discussed above) will not be attached as a summary judgment exhibit even though the Customer Agreement states that it is part of the customer's contract with Wells Fargo Bank and is referenced numerous times in the small print.   

Unlike final account statements from Target NB, Capital One, and Citibank, the last Wells Fargo account statement will typically not reflect acceleration of maturity; i.e. it will show an amount due on a date a few weeks after the end of the current billing cycle that is significantly less than the amount of the revolving balance (or it may show chargeoff without prior acceleration of maturity and zero balance). Additionally, the last statement will show how much of the minimum payment amount represents the past-due amount.

If the last monthly statement is deemed admissible for the truth of what is expressly set forth on it (based on the business records affidavit), it would not support the proposition that payment was due in full. If the affiant testifies otherwise, the conflict in the evidence should preclude summary judgment, in addition to raising an issue of credibility. Wells Fargo's counsel may argue in reply that the card agreement authorizes acceleration (with reference to paragraph 25 titled "DEFAULT / IMMEDIATE REPAYMENT OF BALANCE IN FULL"), but even if the contractual basis for this lender remedy is established, the conflict in the evidence should still preclude resolution of the case by summary disposition. The last statement would only support a claim for the past-due portion of the minimum payment amount as damages caused by breach consisting in cessation of monthly payments by the cardholder. 

Additionally, if there is no showing of acceleration of maturity prior to the lawsuit, defendant's counsel may assert that the presentment requirement has not been satisfied for attorney fee purposes under Chapter 38 of the Civil Practice and Remedies Code. This issue should be raised in the answer (or amended pleading) in the form of a specific denial that Plaintiff has met the conditions precedent for fee recovery.

LINKS TO PROFILES OF OTHER MAJOR CARD ISSUERS AS PLAINTIFFS

American Express debt collection suits in Texas courts

Credit card debt suits by Discover Bank

Capital One Bank suing Texas customers on defaulted credit cards

FIA Card Services N.A. suing on Bank of America credit cards 

TD Bank now bringing debt collection suits on defaulted Target credit card accounts  

FINANCIAL INSTITUTION ENTITY INFORMATION FROM OCC AND FDIC 

Wells Fargo entities listed on FDIC web site

Wells Fargo Bank, National Association: Institutional History

Wells Fargo Bank listing on the Comptroller's National Bank List
OCC website (November 2013 version)

Affiants and affidavits in debt collection suits by American Express

AFFIANT WHO-IS-WHO: AMERICAN EXPRESS

Who signs affidavits in American Express credit card debt suits?  

  

Affiants in American Express debt collection suits typically identify themselves as "Assistant Custodian of Records", but several of them (recent examples are Edmond Garabedian, Richard Kier, Danielle Nichols, and Kurt Sipmann) execute affidavits in that capacity both for American Express Bank, FSB and for American Centurion Bank. These banks are two separate and distinct financial institutions that are both located in Utah, but the affiants sign affidavits in other states: New York, Massachusetts, and California. 

There is reason to believe that the affiants are robosigners, and may not even get to see what is being attached to their affidavits by American Express lawyers in Texas. The affidavits do, however, greatly vary in substance, and quality. As noted elsewhere, Amex employs a number of different lawfirms and attorneys (Adams, DeGrasse, Johnson & Silver, Regent, Scheinthal, Scott, Zwicker) to pursue holders of defaulted accounts in Texas.

Because of the great variation among affidavits, and even modification of the stock language in the affidavit templates used by the same law firm over time, it is difficult to generalize about them. While they are not unique (they are always based on a template which is used in multiple, if not numerous similar lawsuits), each must be considered separately for purposes of identifying its particular weaknesses and possibly viable evidentiary challenges. Some do not even feature proper jurats and/or notarization, and can therefore also be attacked as defective in form. (--> Motion to Strike Plaintiff's Affidavit based on Defect in Form).

What the Amex affidavits do have in common, however, is the fact that the signers are not located in Utah (the banks' home state) and also not in Texas. Monthly Amex account statements, however, typically have an address for payments in Dallas, and an address for correspondence elsewhere in Texas (El Paso) printed on them. The geographic discrepancy between the bank's place(s) of business and the work site of the affiant should at least require an explanation as to how the affiant would be in a position to authenticate records and testify about payments or no payments having been received, or absence of a billing dispute, when the affiant has no obvious or demonstrated connection to any of the places where Amex operations are actually located, or where the bank receives payments and other mail. (---> Motions to strike creditor's affidavit).

NAMES, TITLES, AND LOCATIONS OF AFFIANTS THAT HAVE APPEARED IN RECENT DEBT SUITS BY AMEX FILED IN TEXAS

Edmond Garabedian, Custodian of Records (State of New York) (2012)(some with notary stamp of Vanessa Felice, qualified in Queens County, State of New York).

Richard Kier, Assistant Custodian of Records (State of New York, New York County, with notary stamp of Deric M Behar or Eric Robert Calantone)(2013); Manuel A. Rodeiro Notary Public Qualified in New York County (2014)

Linda Salas, Assistant Custodian of Records (Commonwealth of Massachusetts)(2012)

Danielle Nichols, Assistant Custodian of Records (Commonwealth of Massachusetts, County of Essex, with notary stamp of Laurie Marcoux) (2013)

Kurt Sipmann [not Sippman] (State of California, Ventura County;  with notary stamp of Karen E. Donica, Notary Public)(2011, 2013)

Other affiants: Joseph Hammon, Assistant Custodian of Records; Kapil Ralli, Assistant Custodian of Records; A. JOSHI; I. CHAO, Attorney-in-Fact

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. 

Discover Bank - Original Creditor as Plaintiff (profile)

DISCOVER CREDIT CARD COLLECTION SUITS IN TEXAS COURTS

NAME OF CARD ISSUER AND ENTITY TYPE

Discover Bank is a bank operating out of Delaware and a leading issuer of credit cards nationwide. It is not a national bank under the National Banking Act, but it is insured by the FDIC. Discover Bank appears as plaintiff in debt collection suits, but other entities are also involved. 

SERVICERS AND SUBSIDIARIES

March  2015 UPDATE: DB SERVICING CORPORATION DOES NOT EXIST ANY MORE. See image of record from Ohio Secretary of State: 

The new servicer is DISCOVER PRODUCTS INC, a UTAH corporation. Also see list of Discover Financial Services family of companies (image added to bottom of this post) 

Discover Bank relies on servicers to handle part of its operations. Two affiliated entities' names appear in summary judgment affidavits:  DB Servicing Corporation and DFS Services LLC.

The numerous people who execute summary judgment affidavits for Discover Bank in debt collection suits (see partial list below) are employees of the servicers. Some identify themselves as employee of one servicer on some affidavits, and as employee of the other entity on others. They may be full-time affidavit signers, but their job titles are typically given as “Legal Placement Account Managers” or “Litigation Support Specialist”.

LAWFIRMS AND LAWYERS THAT SUE ON DISCOVER BANK'S CREDIT CARD ACCOUNTS IN TEXAS 

Discover Bank has many customers in Texas and sues on defaulted accounts in its own name. For that purpose, it employs more than one law firm in Texas. The debt collection firms used by Discover include ZWICKER& ASSOCIATES; RAUSCH, STURM, ISRAEL, ENERSON & HORNIK, LLC ("RSIEH"); and SCHEINTHAL & KOUTS, L.L.P.

Additionally, Discover Bank debt suits are also brought by WEINSTEIN & RILEY, P.S. a law firm with offices in Seattle, Washington. Because it is a legal requirement, WEINSTEIN utilizes Texas-licensed attorneys to handle cases in Texas court (Josh Harrison, Jason D. Anderson, Cody Moorse).

VOLUME OF LITIGATION 

From August 2012 to August 2013 Discover Bank filed 454 cases in Harris County District Courts. The total for the four civil county courts at law for the same time span was 66.
  

DISCOVER CARD AGREEMENTS

Discover Bank’s form contracts are typically more than two dozen pages long and have a table of content, with page references. The bank’s standard agreements come in many versions, which are identified by Copyright Year and by versions codes consisting of numbers and a letter in the footer of the first page. 

For Example: TL20A.0508 from 2008, and  TL22H.0210 from 2010 

  
The iterations of agreements appear to be consecutively numbered. Assuming Discover Bank started with TL01, there are now more than twenty successive versions, not counting version distinguished by the letter designations ("A" and "H" in the examples above).  

Arbitration Clause 

Like most other CMAs, Discover Bank CardmemberAgreements contain arbitration provisions. The choice of law is Delaware, which reflects its home state and that state’s requirement that all banks located there operate under Delaware law.

Usury Avoidance Clause 

Unlike most other CMAs, Discover card agreements also contain a usury savings clause. That clause is designed to avoid usury liability in the event a variable interest rate exceeds the legal limit in a particular jurisdiction. It provides for a credit for all overcharges resulting from the application of an excessive interest rate.

MONTHLY ACCOUNT STATEMENTS

Finance Charges

Monthly Discover Card statements contain two or three balance categories, depending on whether a balance transfer offer was made and utilized. The standard balance categories are Purchases and Cash Advances. Different interest rates may apply to different balance categories. The interest rate for the balance transfer category will typically be a low rate (e.g  3 for 4 percent) for a limited time.

Interest rates on Discover Card account statements run as high as 29.99%. This is legal under Delaware law, but could be challenged as usurious if the Plaintiff does not invoke Delaware law or other basis for exemption from Texas interest rate limits (-- > usury under Texas law). 

Payment address and address for correspondence 

Discover Bank statements have either one of two addresses printed on payment coupons: a post office box in Phoenix Arizona ZIP Code 85038 or one in Carol Stream, Illinois with ZIP Code 60197.

Interestingly, Discover Bank requests that correspondence be sent to an address in Utah: P.O. Box 30943 Salt Lake City, UT 84130. This is presumably the address where complaints (billing disputes) should also be sent. Implication: If an affiant testifies about no dispute having been received, the affiant should show a connection to the Utah office to be in a position to do so based on personal knowledge and familiarity with mail received and documents created at that location.  

Purported “duplicates” of monthly statements for use in litigation

For litigation purposes, Discover Bank (or an affiliated company) re-generates statements from a database; oftentimes a whole stack of them (but the volume of documentation appears to vary among attorneys). They are not necessarily true and accurate copies of the statements that were actually mailed near the date shown as the billing cycle closing dates. On occasion the statements created for use as litigation exhibits differ from the originals. They may even have a different mailing address on them.  

Additional documentation produced by Discover as Plaintiff in debt collection suits 

Unlike most other credit card issuers, Discover Bank produces (and uses as exhibits) images of checks signed by card members and sent with payments, along with the corresponding payment coupons torn off from the monthly statements and enclosed in the envelope in which the payment is sent. At least in a subset of debt collection cases this type of evidence appears as part of the summary judgment submission. Unlike the re-generated monthly statements, these exhibits appear to be genuine copies (or images) of the originals as indicated by the presence of handwriting on them.  

  

AFFIDAVIT SIGNERS IN RECENT CASES  

Danielle Laughrey, identified as "employee and custodian of records for DB Servicing Corporation, the servicing affiliate for Discover Bank". Her affidavit states that DB Servicing Corporation is a wholly-owned subsidiary of Discover Bank.  Like other affiants, Laughrey also signs affidavits in Franklin County in the State of Ohio. She also acts as a notary for other affiants. 

Patrick Sayers, identified as "Litigation Support Specialist" for DB SERVICING CORPORATION, signs affidavits in Franklin County, Ohio (Notary: Phyllis A. Scholey)

James Ball, Litigation Support Manager for DB Servicing Corporation

Natasha Szcyzgiel, Legal Placement Account Manager, signing affidavits in the State of Ohio, County of Franklin.

Additional affiants whose affidavits have appeared in lawsuits by Discover Bank in Texas courts: 
Heidi Leo, with Abigail Fried as notary
Joshua Frazier, with Bethany Stark as notary 
Janice Dorr, with Schloley as notary
Bethany Stark, Robert Adkins, Stacey Holmes, Stefanie Watkins, Tiffany Adair, Stephen Ball, Erin Marmol

   

WHAT’S UNIQUE OR NOTEWORTHY IN SUITS ON DISCOVER BANK ACCOUNTS?

The usury-avoidance clause that is a feature of all Discover Bank cardmember agreements.

DISCOVER FINANCIAL SERVICES & DISCOVER BANK: RELATED ENTITIES

Discover Financial Services - List of Subsidiaries incl. Discover Bank (2015)

OTHER CARD ISSUERS THAT BRING THEIR OWN LAWSUITS AGAINST CONSUMERS / CARD-HOLDERS

American Express Centurion Bank
American Express Bank, FSB
Bank of America (through FIA Card Services N.A.) 
Capital One Bank
Citibank, N.A.
Target National Bank

Capital One Credit Card Accounts in Court

CAPITAL ONE CREDIT CARD DEBT SUITS 

Capital One Bank USA, N.A. (“Capital One”) is a national bank as indicated by the “N.A.” suffix in its name.  It typically brings its own debt-collection lawsuits, rather than selling charged-off accounts to debt buyers (hough there is some of that too, e.g. debt collection suits by Cach, LLC, and Midland Funding, LLC). 

Capital One (i.e., the two-word version of the name) is not the bank’s legal name. It is a federally registered service mark.  

The Comptroller of the Currency’s web site indicates that there are actually two different Capital One banks, with separate charter numbers: Capital One Bank (USA), National Association and Capital One, National Association, with different location. 

Both entities’ names appear in debt collection lawsuits, sometimes within the same suit. 

Suing in its own legal name puts the bank in a better position to prove its case than the assignee. 

In 2012, Capital One (both banks) acquired the credit card portfolio of HSBC Bank Nevada, National Association, Las Vegas, Nevada (“HSBC Nevada”), which subsequently went out of business as a bank by merging into is non-bank parent. 

Transaction summary for HSBC-Capital One Deal
for Acquisition of Credit Card Portfolio
 

LAW FIRMS SUING ON CAPITAL ONE CARD DEBT  

Debt collection suits based on Capital One cards are filed by several leading law firms engaged in debt collection in Texas: JENKINS WAGNON & YOUNG, P.C.; RAUSCH, STURM, ISRAEL, ENERSON & HORNIK, LLC; MICHAEL J. SCOTT, PC (Michael Joseph Scott).  

RAUSCH has also brought suits on debt owed on Capital One credit cards that was sold to Cach, LLC. 

VOLUME OF CAPITAL ONE LITIGATION (IN HARRIS COUNTY) 
  
Over the course of a one-year period ending August 19, 2013, Capital One filed 246 lawsuits in county courts at law in Harris County. This is the total for lawsuits by several Capital One entities (or filed under different name versions of the same entity): CAPITAL ONE USA, NA / CAPITAL ONE (USA) NA; CAPITAL ONE NA / CAPITAL ONE NATIONAL ASSOCIATION;  CAPITAL ONE AUTO FINANCE; and CAPITAL ONE AUTO FINANCE INC. The electronic docketing system and search function allows for parentheses in a name, but does not provide for use of punctuation. 

Capital One rarely files suits in Harris County District Courts. The number in those courts is insignificant. 

  

CAPITAL ONE CARD AGREEMENTS 
– OLD VERSIONS VS. NEW ONES  

TITLE OF CONTRACT DOCUMENT 

Capital One’s standard account agreements are titled “CUSTOMER AGREEMENT”. The older ones typically consist to two pages, with an “ARBITRATION AGREEMENT” as a separate page. The last paragraph of the CUSTOMER AGREEMENT addresses arbitration, and incorporates the separate one-page arb agreement by reference.  The newer versions (2010 forward) are comprised of multiple pages, each with two columns, with text that is printed in larger font than was the case with older ones (which can be hard to decipher if the reproduction is bad).  Version codes and copyright years typically appear on the bottom of the last page of the agreement.  

NEWER AGREEMENTS VS. OLDER ONES  

There are also substantive differences: The older customer agreements include arbitration provisions while the more recent ones do not. 

This raises an interesting issue for accounts that predate the arrival of the new customer agreements. If the original contract encompassed an irrevocable arbitration agreement, can the arbitration agreement nevertheless be superseded by a modification agreement that deletes any reference to arbitration? 

Of course the issue is only of import when the defendant in a debt collection suit (or the attorney for the defendant) sees an advantage in having the claim arbitrated. After all, the right to arbitrate is contractual, and can be waived. 

CHOICE OF LAW AND STATUTE OF LIMITATIONS   

Whether or not arbitration provisions are included in customer agreements drafted by Capital One, all versions have a choice of law clause that provides for application of Virginia law. Some time ago, Capital One lost on the statute-of-limitations issue in Florida, when a court there ruled that the shorter statute of limitations applied to a debt collection suit filed by Capital One against a debtor in that state.  So Capital One then modified the choice of law clause in its standard CUSTOMER AGREEMENTS to assure for itself the benefit of the longer limitations period. The typical choice of law language now reads like this: 

“We make decisions to grant credit and issue you a Card from our offices in Virginia. This Agreement will be interpreted using Virginia law. Federal law will be used when it applies. You waive any applicable statute of limitations as the law allows. Otherwise, the applicable statute of limitations period for all provisions and purposes under this Agreement (including the right to collect debt) will be the longer period provided by Virginia or the jurisdiction where you live. If any part of this Agreement is found to be unenforceable, the remaining parts will remain in effect.” 

ADDITIONAL CONTRACT DOCUMENTS - SEPARATE TILA DISCLOSURES   

The newer, multi-page CAPITAL ONE CUSTOMER AGREEMENTS, contain an enumeration of other documents that are defined as being part of the contract in addition to “this agreement”, which is numbered (1). The list includes Truth in Lending Disclosures regardless when issued, “all other documents and disclosures relating to your Account including those provided online”, and “any future changes we make to any of the above things” [sic].  

Enumeration of documents in 2013 version of Capital One Customer Agreement

This raises an interesting question also: Does the presence of the list in the document Capital One presents as the applicable contract elevate the proof requirements for the bank as movant for summary judgment?

After all, the incorporation of additional documents by reference indicates that the CUSTOMER AGREEMENT, standing by itself, is not complete.  Even if an examination of all of the contract language contained in the CUSTOMER AGREEMENT were to reveal that it covers each of the essential elements of a contract for an open-end credit account, the list expressly contemplates that those terms may be changed by the bank in the future. So, arguably, when Capital One sues, it would have to adduce competent testimony to the effect that no changes were subsequently made, or testimony to the effect that some terms were indeed modified. In the latter case, the modification document(s) would have to be attached because the summary judgment rules require attachment of referenced documents. 

SUMMARY JUDGMENT AFFIDAVITS FILED BY CAPITAL ONE BANK 
   
Typically, however, the affidavits filed by Capital One are not very elaborate. Titled “BUSINESS RECORDS AFFIDAVIT” rather than Summary Judgment Affidavit, they are limited in purpose (authentication of account records) and consist only of a few paragraphs. They typically contain only one fact above and beyond the predicate verbiage for the admission of account records: the date of account creation, with reference to what the records show. Capital One usually includes a document rarely seen in the summary judgment submissions of other debt plaintiffs: a copy of the account application. This exhibit is normally incomplete (typically only the front page is included) and is often of poor reproductive quality, which makes it illegible in part).  

HISTORY OF DECEPTIVE PRACTICES IN LURING NEW CUSTOMERS WITH LOW-RATE OFFERS, THEN HIKING THE APR

According to a class action complaint filed in California, Capital One mass-mailed credit cards offers that promised a low fixed APR of 6.99% that would change only under three specified conditions.The rate would apply to purchases and balance transfers. Capital One would then hike the rate on consumers that open accounts under the offered rate even though they had complied with their payment obligations. Capital One did so for "market-based" reasons, i.e. to maximize its own profiles, rather then any act or omission on the part of cardholders. The solicitations had specifically stated  THIS IS NOT AN INTRODUCTORY RATE.. Rubio v. Capital One Bank. 

Misleading solicitation material promised a low "fixed" rate  

Rubio was a recipient of the direct-mail offer and opened an account, but had her rate subsequently raised to 15.9% even though she did not do anything to trigger the three conditions under which the rate could be hiked. The cardmember agreement that Capital One mailed after the consumer had accepted the offer contained a reservation of rights clause as to future changes of terms, but the solicitation did not do so in the box in which the “fixed” interest rate was displayed. Outside the so-called “Schumer Box”, but farther down on the same page, there was a heading that read "Terms of Offer." Under that heading, in fine print, the solicitation provided, as part of the terms: "I will receive the Capital One Customer Agreement and am bound by its terms and future revisions thereof. My Agreement terms (for example, rates and fees) are subject to change."

When the consumer eventually sued Capital One for deceptive practices in advertising its low-rate credit card, she sued as a cardholder who had never submitted a late payment, exceeded her credit limit, or had her payment returned. She nevertheless received written notification from Capital One that her "fixed" APR of 6.99% would increase to 15.9%. The only way for her to avoid the increase was by closing her credit card account and paying off the balance.

The federal district court dismissed the consumer’s complaint about the increase in the “fixed” rate, but the Ninth Court of Appeals reversed the dismissal and revived the lawsuit, finding that the consumer had stated a claim under TILA that deserved to go forward because the disclosure in the solicitation did not meet the TILA requirement for clarity and conspicuousness. In reaching this conclusion, the federal court of appeals referenced the findings of a study commissioned by the FED that concluded that consumers interpret the term “fixed” rate as a rate that would not change. 

TILA REGULATES CONTENT OF SOLICITATIONS AND MANDATES CLARITY IN THE REQUIRED DISCLOSURES  

TILA and Regulation Z require a Schumer Box to disclose credit card APRs. 15 U.S.C. § 1637(c)(1)(A)(i)(I); 12 C.F.R. § 226.5a(b)(1). This disclosure must be clear and conspicuous, 15 U.S.C. § 1632(a); 12 C.F.R. § 226.5(a)(1), which, for purposes of credit card solicitations, is defined in the official staff commentary to Regulation Z as "in a reasonably understandable form and readily noticeable to the consumer." 12 C.F.R. pt. 226 supp. I, para. 5a(a)(2), cmt. 1. Thus, Regulation Z prohibits a Schumer Box from making "misleading" APR disclosures, where "misleading" means a disclosure that a reasonable consumer will either not understand or not readily notice under the "reasonable cardholder" standard”. Put differently, an APR disclosure that is not "clear and conspicuous" is ipso facto "misleading."

OTHER MAJOR CREDIT CARD ISSUERS THAT SUE CARDHOLDERS 

American Express sues very soon after cardmember stops making monthly payments
Bank of America sues card holders through FIA Card Services N.A.
Capital One collection suits on defaulted accounts
Citibank as debt suit plaintiff in Texas courts
Collection suits on Target cards by TD Bank
Discover Bank credit card debt suits
Wells Fargo debt suits on defaulted consumer accounts