Debtors' affidavit in opposition to PMSJ (Plaintiff's Motion for Summary Judgment)

USE OF DEBTOR’S AFFIDAVIT TO OPPOSE CREDITOR’S MOTION FOR SUMMARY JUDGMENT  

-- Is it a good idea?

Fighting fire with fire: the use of counter-affidavits to oppose a debt plaintiff’s motion for summary judgment 

The customary way to oppose a traditional motion for summary  judgment is to file a counter-affidavit that raises a fact issue. If none is filed, some judges will remark on the absence of such an affidavit when there is an oral hearing, and wonder why. 

But the strategy of filing a counter-affidavit to defeat a debt plaintiff’s motion for summary judgment in debt collection cases is not generally very promising because the debtor usually owes the money, and has no good documentary evidence to defeat the Plaintiff’s claim. 

The few reported opinions that discuss counter-affidavit filed by credit card debt defendants highlight the low probability of success. The affidavits typically denied assertions made by the plaintiff or the plaintiff’s affiant, and lacked factual specificity sufficient to raise a genuine issue of material fact. Or so the justices opined, and what justices say in written opinions is highly consequential because trial court judges don’t like to compile a record of being reversed, and therefore pay heed. Not the mention that they are also required to follow the (case) law as pronounced in binding precedent-setting opinions by the court of appeals in their local jurisdiction. Decisions from other courts of appeals may provide more leeway for a trial court judge when cited by an collection attorney, or by his opponent, for that matter.  

Nor are credit card defendants typically in a position to offer meaningful documentary evidence that would be helpful to their effort to defeat the Plaintiff’s claim. 

In the rare case where the Defendant preserved monthly account statements, they will in all likelihood show the same account financials, even if the originals differ in appearance because (some) card issuer create account statements for litigation, and do not always use the correct forms or templates to print the information (which invariably comes from a database) when they do so. Other creditors apparently archive digital images of the original account statements in a database (or at least claim so) and therefore can print copies as litigation exhibits that are identical to the originals except perhaps for color and a line of metadata in the footer of the page (or elsewhere in the margin) that identifies the image in the database and may also include a date.  

A counter-affidavit by the debtor may nevertheless be a good idea under some circumstances 
   

That said, filing a countervailing affidavit may work under special, albeit rare, circumstances: (1) when the defendant is not the person identified by name on the bank’s account statements; (2) when the defendant is willing to admit that he owes money, but that the amount shown on monthly statement(s) or account history ledger is incorrect and the defendant has evidence to either support the claim of error (such as incorrect calculation), or evidence to support a different amount (rather than just denying that the amount is correct). If the affidavit amounts to nothing more than a sworn denial of the damages figure attested to by the plaintiff’s affiant, it will likely be excluded as conclusory. The applicability of that objection is by no means limited to the affidavits of movants for summary judgment. 

DEFENDANT’S AFFIDAVIT IN SUPPORT OF AFFIRMATIVE DEFENSE 

A client affidavit may also be advisable if it is clear that the plaintiff’s claim is time-barred. In that case, it is safe for the client to admit making the last payment in such and such month of such and such year, and that nothing has been paid since (but see --> accrual date of breach of contract claim vs. open-account claim).  Indeed, such affidavit may allow the defendant to cross-move for summary judgment in the defendant’s favor based on the statute of limitations, rather than merely raising a fact issue in that regard in order to defeat the Plaintiff’s motion (-- > Cross-motions for summary judgment by debtor).  

If a debt plaintiff’s claim is time-barred, the admission of liability under the card agreement and the correctness of the amount shown on monthly statements are not prejudicial to the defendant because limitations is an affirmative defense that can be invoked to defeat an otherwise valid and well-documented debt claim. For the same reason, even  deemed admissions on all  essential elements of the plaintiff’s cause of action should not be a problem, unless the admissions include one to the effect that the debt claim is not time barred, or an admission that a payment was made within the four-year time span prior to the filing date.  If that is the case, it may be necessary to file a motion to strike the deemed admissions. 

Thanks to a fairly recent Texas Supreme case, the standard for having deemed admissions set aside is pretty lenient.  

It the plaintiff’s summary judgment evidence contains a series of consecutive monthly statements that reflect that the default occurred more than four years prior to the date suit was filed, it would also make no sense to challenge the authenticity and admissibility of the monthly account statement (or to attack the affiant’s qualifications to lay a proper predicate for admission of account statements as exceptions to the hearsay rule).  

COUNTER-EVIDENCE IS NOT MANDATORY TO SURVIVE TRADITIONAL SUMMARY JUDGMENT MOTION 

Under the Texas rules and caselaw, a traditional motion for summary judgment cannot be won by default because the movant must establish all essential elements of its claim against the opponent, or disprove the defendant's affirmative defense to dispose of such defense. In other words, the burden is on the movant.Therefore, if the movant for summary judgment (creditor) does not adequately support its motion with competent evidence, it does not matter whether or not the defendant filed counter-evidence. That becomes relevant only when the Plaintiff establishes a prima facie case for summary judgment in its favor, and the burden switches to the non-movant to show why summary judgment should nevertheless by denied. No-evidence motions are governed by different rules.

CASELAW SNIP ON APPLICABLE STANDARD 

Pro Se Defendants often court Defeat and Default Judgment, if not Disaster, by doing nothing or making things worse

COMMON ERRORS BY UNREPRESENTED LITIGANTS

Stasis & Default:  Not doing things that need to be done.

Debt suit defendants typically know little or nothing about the rules of procedure and thus suffer the adverse consequences for not hiring a lawyer (or not being able to afford one) to explain matter to them, or do what needs to be done on their behalf. As a result, debt collection attorney’s “win” a lot of cases simply because the case is not contested at all, or because the defendant makes a serious error that relieves the plaintiff from proving its case.   

Failure to file an answer

It does not take much to prevent a default judgment. All that is required is the filing of an answer, and the courts are very lenient when it comes to judging whether a piece of paper qualifies as an answer. Even a letter to the judge may do, although the rules that require a copy be sent to the opposing party’s attorney would still apply (and would likely be ignored).

Many defendants, however, do not only fail to hire a lawyer, but fail to take any action at all, thus inviting what in most cases is highly predictable, a default judgment. --> Default Judgment Signed, Now what? --> The challenges of appealing a judgment in collection suit without a lawyer. 

Failure to answer REQUESTS FOR ADMISSIONS

Same for requests for admissions. Doing nothing has grave consequences. Not answering them will result in deemed admissions by default. A defendant may not want to believe that they are due within 30 or 50 days as stated on the paperwork. That's understandable. After all, it's the attorney that’s suing them that says so; -- the same attorney that also may have stated that “all information obtained will be used for debt collection purposes” or something to that effect.  But the defendant’s distrust or wariness about providing information does not suspend the operation of the deemed admissions rule. It does not matter that the defendant took the FDCPA (mini-miranda) warning seriously and refused to provide the information that was requested. It's a trap for the unwary, and collection attorney deliberately set it because the want the defendants to fall into it.   

  

Unnecessary judicial admissions thanks to well-meant SOB-STORY NARRATIVES in pleadings 

Some unrepresented litigants may feel a need or urge to respond, and do so in writing. Some use it as an occasion to wail and vent. Bemoan their dire conditions and protest that they would have been paying if only they had the money. And that's understandable, but often meets with no sympathy. 

The harsh reality is that collection attorneys don't care. They have heard it all, and if it bothered them inflicting yet more misery on people already down on their luck, they wouldn't be doing it. Or not for long. Many judges don't care either. Debtors are just names and numbers. And dollar figures on judgments. To be processed. The more efficiently, the better. It will make the statistics look good. Attorneys have the upper hand because they are in court on a regular basis and interact with the staff. Not only are they lawyers, they know the ropes. How things are handled in a particular court.

Most defendants don’t know that under the Texas pleading rules they can answer with a general denial and then wait and see if the creditor files a motion for summary judgment or takes some other action. Instead they volunteer information that is superfluous under the pleading rules, and may amount to judicial admissions that can be used against them later. 

Luckily, the Texas Rules of Procedure are very liberal with respect to amendments. If a pro se litigant were to have filed an inappropriate answer but retains a lawyer before a dispositive motion is filed and heard, or the case goes to trial, the error can be fixed by filing an amended answer. Even if the deadline for amendment set by the seven-day rule or a docket control order has passed, a newly-retained attorney can file a motion for leave to amend the pleadings, which the court will probably grant. 

Arbitration vs Litigation - PROs and CONs in credit card collection context

Can an arbitration clause work in favor of the consumer sued on a debt? 

BENEFITS OF ARBITRATION TO THE DEBT SUIT DEFENDANT 

 
The official rationale for the public policy preference in favor of arbitration, and ADR in general, is that is provides a more efficient and less expensive mechanism for resolution of disputes in a private setting.   

Unlike mediation, however, which will result in a resolution only upon consent of both parties to the terms of a settlement facilitated by the mediator acting as a disinterested third party, the arbitrator renders a decision (arbitration award) that is binding upon the parties whether they like it or not. The arbitrators essentially performs the role of a judge, but is not a public official. 

Arbitration thus bears great resemblance to a court proceeding, but it still offers a number of distinct advantages over a court proceeding. At least for one party to an arbitration clause within a contract.   
   
Providing a benefit to customers was likely not the motivation for most credit card issuers to write arbitration provisions into account agreements. But the fact is that most such agreements still contain them, and they are equally available to both parties. Even if a credit issuer substituted a new cardmember agreement that omits arbitration to replace an earlier version, this may not cancel the right to arbitrate if the prior agreement contained an arbitration clause that was irrevocable. 

By filing a debt collection suit, the bank or its assignee has already expressed a preference for litigation over arbitration. But the defendant still has a choice, assuming there is no dispute as to the identity of the contract that governs the parties’ relationship (-- > existence of arbitration agreement; -- > contract formation).

ARBITRATION BEFORE AND AFTER INITIATION OF A DEBT COLLECTION SUIT

If the consumer has a choice to opt for arbitration prior to a lawsuit being filed, he or she can avoid a public record of a lawsuit having been filed in which he is the defendant (though that may eventually also happen after an arbitration, if the consumer loses, does not pay the debt, and the creditor files a suit to confirm arbitration award.)  

But even when a debt collection lawsuit is already on file, the Defendant should in most cases be able to better protect privacy by moving for arbitration because the creditor will then have to make its case privately in arbitration, rather than publicly in court. Court proceedings always create a public record and motions to seal the record are virtually unheard-of in debt collection cases. So, if a debtor does not want to have a public record, arbitration would seem to be the better forum, or will at least delay the creation of a public record. These days, of course, Creditors simply file collection suits en mass and do not bother with arbitration. 

Protection of Privacy Interests

If a motion for summary judgment is filed in a credit card debt suit, it often entails years worth of spending on credit cards becoming a matter of public record as summary judgment exhibits. Some defendants may not care if copies of credit card statements are filed in court, but others may not wish to have their spending history revealed to anyone who might be interested. In many court systems, exhibits are now accessible over the web along with pleadings and other court-filed documents.  

Additionally, sensitive information, such as social security numbers, birth dates, income and employment data, may make into the court’s file also (and possibly on-line), even if such information is supposed to be redacted. Plaintiffs' attorneys and their law office staff do not always take care to remove or blacken out protected information. Sensitive information of this nature typically appears on credit applications. Though not routine, some plaintiffs include an application for a credit card among their exhibits. In other types of debt collection litigation – such as on lines of credit and promissory notes – the inclusion of the application for credit as a summary judgment or trial exhibit is even more common.

Discovery Burdens 

The normal rules of discovery that govern a lawsuit filed in a Texas court do not apply in arbitration. The same is true of such matters as deadlines as they are found on court-issued docket control orders.  To the extent a creditor’s attorney has a policy of serving a load of discovery requests, the defendant can avoid the hassle of having to respond to it, and would not face a motion to compel or a motion for sanctions that would otherwise be authorized under the discovery rules.

By having the debt matter dealt with in arbitration, the consumer can also avoid being subpoenaed through the court system, on pain of contempt of court for noncompliance with the subpoena.

Depositions are rarely taken in debt collection suits. But it does happen occasionally and private court reporters that transcribe the question-answer-session are expensive. If the deponent loses, the cost of the deposition, which may run into the hundreds of dollars or more, qualifies as a part of the “taxable cost” of the lawsuit, and the looser becomes liable for it in addition to the amount of the judgment.

Grace period to weigh options and improve settlement posture

Although arbitration is touted as a quicker method of dispute resolution, this may not be the case. Particularly when the creditor and the lawfirm it retains for litigation are not set up to arbitrate cases on a large scale and in an efficient manner. 

If the diversion to arbitration results in a delay, it may provide the defendant additional time to earn or otherwise raise funds for a settlement, or to contemplate whether or not to file for bankruptcy. A delay in the resolution of a debt case may be of particular benefit to a debtor who is unemployed, but not unemployable, assuming continued improvement in the relevant job market enhances the prospect of improving his or her financial condition.

Additionally, if a defendant insists on arbitration, and this causes inconvenience to the Creditor or its lawyers, the chances of settlement on more favorable terms may improve.

Enforceability

An arbitration award constitutes a final authoritative resolution of the case, just like a judgment, but it is not enforceable as a judgment unless and until it is confirmed by a court of competent jurisdiction. This requires a return back to court and a proper motion to confirm (if a case was filed in court first and abated) or an independent lawsuit filed for the sole purpose of confirming the arb award and turning it into a judgment, with all the consequences such a judgment entails, -- such as execution and recording of an abstract of judgment in the county’s real estate records, and garnishment of bank accounts. 

DISADVANTAGES OF OPTING FOR ARBITRATION OF A DEBT SUIT

The Texas Rules of Civil Procedure and Rules of Evidence do not apply in arbitration because arbitration organizations have their own rules of procedure.

Therefore, in cases in which these rules could be invoked to secure a resolution in the defendant’s favor in court, they may not be effective in arbitration notwithstanding the applicability of the substantive law regardless of whether the case is in judicial or arbitral forum. The procedural aspects and admissibility issues are a different matter.

Examples would be objections to authenticity of documents and challenges to the competency and qualifications of affiants, particularly in the case of debt collection suits brought by downstream debt-buyers at the end point of a chain of assignments.  Such evidentiary objections are often successful in court in defeating a motion for summary judgment, and may also prove effective at trial. On the other hand, many arbitrators were previously judges, and may be receptive to evidentiary arguments because have had plenty of occasion to deal issues of authenticity and admissibility while on the bench.  

AVOIDING THE EFFECT OF DEEMED ADMISSIONS - "PLAN B" FALL-BACK 

That said, a motion to compel arbitration might be an alternative method to deal with deemed admissions because the deemed admissions would not be valid as a substitute for evidence in another proceedings. 
  
Since the Texas Supreme Court has set the standard for withdrawing (or striking) inadvertent deemed admissions rather low, however, a move for arbitration to avoid the consequences of not having answered requests for admission in a timely fashion will often be unnecessary. Still, it may provide a Plan-B option should the trial court, contrary to expectations, rule against the defendant’s motion to strike deemed admissions, which is the proper mechanism to deal with this type of problem.

A plaintiff avoid the effects of deemed admission (i.e. its failure to answer requests for admission served on it by the Defendant’s counsel) by non-suiting the pending action and causing it to be dismissed without prejudice to re-filing it later. 

But a non-suit is not an option for the defendant. Even if the Defendant had become a plaintiff by asserting a counterclaim for wrongful debt collection practices, a nonsuit by the Defendant as Counter-Plaintiff would only dispose of the counterclaim. It would not make the Creditor's claim go away. 
  Stated differently, the Defendant has no equivalent mechanism to terminate the lawsuit unilaterally and return the parties to their original positions. But a motion to compel arbitration might be a way to get the case into a different forum. To avoid claims of waiver, however, such a motion should not be filed late in the game. --> Waiver of the Right to Arbitrate by Litigation Conduct 

Last updated: 12/9/2018

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 

Target Credit Card Accounts in Texas Court (now owned by TD Bank)

  
TARGET CREDIT CARD DEBT SUITS
   
UPDATE: Target National Bank does not exist any more. It was closed and liquidated  March 13, 2013. Its portfolio of credit card accounts was acquired by TD BANK.

WHO ISSUED THE TARGET CHARGE CARD? 

This may sound like a silly question, but the fine print on the customer agreement will likely prove otherwise.

Credit card debt suits involving Target cards come in several varieties, with different entities as plaintiffs. Even when Target sues as original creditor, it is not Target Corporation that's doing it. The credit operations are run through an affiliated bank. While lawsuits have typically been brought by Target National Bank ("Target NB"), sometimes a closer look at the documentation will reveal that the cardmember agreement offered as a summary judgment exhibit (or at trial) identifies the card issuer as Retailers National Bank even though the title of the document makes reference to Target. The attorney for Target NA often does not come forth with proof that the two are one and the same, or that the entity named as the Plaintiff is the successor in interest of Retailers National Bank. Arguably, this constitutes a gap in the chain of ownership or raises a fact issue as to the identity of the original creditor. In addition to litigation brought by Target National Bank itself, debt suits on Target cards are also filed by TD Bank USA, N.A. as successor. The latter's home state is Delaware.

LAW FIRMS SUING ON TARGET CREDIT CARDS IN TEXAS  

Many debt collection suits on Target credit card accounts are brought by a law firm with the unwieldy name RAUSCH, STURM, ISRAEL, ENERSON & HORNIK, LLC ("RSIEH"). The name was even too long to be deemed suitable for a domain name. The debt collection firm's web address thus uses the acronym: www.rsieh.com.

RSIEH has as many as nine Texas-licensed attorneys listed below the signature line on its filings. It represents both Target National Bank and TB Bank USA, N.A. (and other creditors, such as CITIBANK, N.A.). When it sues for TB Bank, its summary judgment evidence typically includes a copy of the ASSIGNMENT AND ASSUMPTION AGREEMENT that governs the transfer of accounts. That agreement lists three Target entities as involved parties: TARGET CORPORATION as the Parent and Depositor, TARGET RECEIVABLES, LLC as a Seller, and TARGET NATIONAL BANK, as a Seller and Depositee.

RSIEH typically does not seek attorney's fees in addition to the amount of the debt and costs of suit (filing fees and cost of service of process).

TARGET CREDIT CARD AGREEMENTS AND TERMS 

Target credit card agreements are typically much shorter than other such form contracts (often only 2 pages with 3 columns each). They also differ from those of most other major card issuers in that they do not contain arbitration clauses, meaning that arbitrability is not an issue and cannot be invoked as a defense to litigation. The form agreements do, however, contain a choice of law clause stating that the agreement is governed by federal and South Dakota law.

A number of credit card issuers chose South Dakota as the relevant jurisdiction for regulatory reasons. Interest rates are not capped by usury laws in that state as long as whatever rate is charged is contractually authorized. Citibank is another major credit card issuer that located its credit card arm CITIBANK (SOUTH DAKOTA), N.A., there.

Copies of Target card agreements offered as summary judgments contain contract verbiage in fine print and are not always legible.

Target cards typically have variable interest rates for two types of balances: Purchases and Cash Advances. The APRs are shown as variable with the letter V in parenthesis. The late fee is $35.00 and a warning about this fee as a consequence of not making timely payments appears on monthly billing statements.

TARGET CREDIT CARD STATEMENTS 

In litigated cases, the account documentation submitted by Target (or on its behalf) typically reveals a key difference. Target routinely accelerates the maturity of the revolving balance on the last statement sent to the card holder. As a result, the amount shown as the minimum required payment on the last account statement ("Minimum Payment Due") matches the amount of the outstanding debt, i.e. the revolving balance. Therefore motions for summary judgment by Target containing such a final statement cannot be fought on the ground that the account documentation does not show that the amount sued for was actually due for payment in full. At best, it could be argued that contractual authorization to exercise the acceleration remedy has not been shown (if either the card agreement itself is not in the record or if there is insufficient proof of the Defendant's liability under the version attached as a summary judgment exhibit).

Unlike some other creditor (e.g. Discover Bank, Citibank) Target does not use a servicer entity to process payments. The billing statements issued for customers in Texas include payment coupons with an address for TARGET NATIONAL BANK either in Minneapolis, Minnesota or in Dallas, TX. The billing statements identify Target National Bank as an affiliate of Target Stores and requires checks to be made payable to Target National Bank.

Related topics: Cases involving Target accounts in Texas Court of Appeals