Can a credit card company sue you?
Yes, credit card companies can sue you for non-payment, though they usually take other steps before doing so. You’re unlikely to be sued until your payment is six months late or more.
If you’re behind on your credit card payments and worried about the possibility of getting sued, read on to learn more about the process, how to fight back – or, better yet, how to avoid it in the first place.
What can credit card companies sue you for?
Credit card companies can sue you if you don’t pay your bills. When you take out a credit card, you agree to pay back the money you borrow from the company in a legally binding contract. This means the company is allowed to file a lawsuit if you don’t hold up your end of the deal.
If you’re wondering, “How often do credit card companies sue for non-payment?” – there is some good news. Because filing a lawsuit takes time, energy, and money, most credit card companies will only sue you as a last resort. You can also be sued by collections agencies, to which credit card companies sometimes sell your debt after you’ve gotten significantly behind on payments.
Understanding credit card collection
After just one late payment, the credit card company can charge you a late fee and report the missed payment to the credit bureaus, affecting your credit score. After two missed payments – 60 days – the credit card company may raise your interest rate, charging you what’s known as a penalty APR. The penalty APR can stick for six months or longer, even if you begin making on-time payments.1 Check your terms and conditions to see if penalty APRs apply to your account.
After three missed payments, or 90 days, more consequences occur. Here’s what you may expect from your credit card issuer if you’re more behind on your payments:
- 90 days after your last payment, you may have received multiple late notices from the credit card company and late fees for each missed payment. You may have also seen an impact on your credit score, though you still have the chance to catch up on payments and maintain your account.
- 90 to 180 days after your last payment, the credit card issuer may choose to close your account, whether you like it or not, and begin the collections process – either in-house or by selling the debt to a collections agency. Until the card is closed, you’ll still be charged late fees for each payment you miss, and you’ll likely begin to receive calls and other notifications from either the card company or the collections agency. While you could be sued at this stage, it’s still unlikely until at least six months have passed.2,3
- 180 days after your last payment, you are more likely to be sued by the card issuer or the collections agency for non-payment. This is just an estimate; each card issuer and collections agency has its own timeline and preferred processes, and it is possible to be sued for non-payment earlier.
4 signs you might be sued for overdue card payments
Each card issuer has its own policies and timeline, so it’s possible to be sued earlier in the process – for instance, 90 days after your last payment.
Fortunately, the answer to “How often do debt collectors take you to court?” is still “not very often.” Most credit card companies and collections agencies don’t move directly to a lawsuit. They can’t file a suit without issuing you a notice. If you’re sued, you’ll likely receive both a complaint and a court summons, which will contain information about what you’re being accused of and steps you can take to respond.
Before we get to that, here are some signs you may be sued for overdue credit card payments:
- You’re receiving physically mailed notices about overdue payments.
- You’ve received emailed notices, too.
- You’re getting repeat phone calls from the card issuer or the collections agency asking you to remit payment.
- Your credit card bill is six months or more overdue.
What to do if a credit card company sues you?
If a credit card company or collections agency sues you and you’re served with a complaint, you’ll want to respond. If you don’t, the credit card company, otherwise known as the plaintiff, will likely automatically win.
Fortunately, if you respond to the complaint – especially if you haven’t received an official complaint or court summons yet – you have options for responding in ways that can lead to a better outcome.
If you haven’t been sued yet, negotiate with your creditor
If you’ve yet to receive an official notification of a lawsuit, you can negotiate with the credit card company. After all, they would probably like to avoid the expense of bringing you to court. Contact their customer service and ask what payment assistance plans they have available for those going through financial hardship.
Depending on the card issuer’s policies, you may be able to reduce your minimum monthly payment amount, lower your interest rate, or settle the debt with a lump sum payment, even if that payment is lower than the debt total.
A credit counselor may be able to help you with this step if you’re uncomfortable going it alone. That said, be aware that some debt settlement agencies charge high prices for negotiations you could have done yourself.
If you’ve received a complaint, make sure it’s legit
If it’s already official and you have a complaint and court summons in your hands, look at the accusations against you and ensure they’re legitimate.
The plaintiff – the credit card company or collections agency – must prove that the debt belongs to you and that you owe the money. (Credit card issuers can usually prove this easily, but a collections agency may not have all the necessary documentation.)
Finally, you should also check to make sure the complaint is within the statute of limitations for debt. The statutes of limitation vary by state and type of debt but are sometimes as low as three or four years – which means that if that amount of time has elapsed, the creditor is no longer legally allowed to sue you.
Although it can be expensive to hire one, a lawyer may help you with this step (or the others below) and may improve your chances of a positive outcome.
Opt for a settlement
If the complaint is legitimate, settling with the plaintiff may be the most affordable and least damaging option for your credit history. The settlement will involve negotiation and likely conclude with you paying some amount of the debt owed, if not the whole amount.
Settling can help you avoid going to court. Getting a lawyer’s professional assistance to ensure the settlement is as beneficial to you as possible can be helpful.
Go to court
If you are sure the credit card company or debt collector’s accusations against you are invalid or illegitimate, going to court is the best opportunity to clear your name. Of course, a favorable outcome is not guaranteed.
If you go to court, you’ll walk through each clause of the complaint and explain your defense in detail, ideally with a lawyer close at hand. (Professional help can greatly increase your chances of winning a credit card lawsuit.) The judge may dismiss the case if you successfully demonstrate that the debt is invalid.
File for bankruptcy
If you’re experiencing financial hardship and cannot pay for legal counsel or a settlement, your best bet may be to file for bankruptcy.
When you file for bankruptcy, creditors can’t continue to harass you for repayment, even if a lawsuit is already underway. Although filing for bankruptcy can hurt your credit history, it can also give you the opportunity to have the debt wiped away and start with a fresh slate.
How to avoid credit card lawsuits
The best way to deal with a credit card lawsuit? Try to avoid it in the first place. If credit card debt has been getting you down, here are some steps to take before things get worse.
- Ask for reduced monthly payments. Call your card issuer and explain your financial situation. They may be willing to lower your minimum monthly payment – though paying more than the minimum is helpful for chipping away at a high revolving debt.
- Ask for a lower interest rate. Interest makes everything more expensive, so if your credit card issuer is willing to offer you a lower interest rate, you may be able to make strides at paying more than the monthly minimum.
- See if you can settle for a lower lump sum. If you are more than a month behind on your payments, your credit card issuer may be willing to settle with you directly if you can pay a lump sum, even if it’s lower than the actual debt total you owe.
- Consult your budget and make changes to stop the cycle. While knocking out debt can be a smart money move, if you don’t make bigger financial changes, you may end up back where you started. Consider checking out areas in your budget where you can make cuts or find ways to earn more money so it becomes easier to spend less than you make.
Ready for a better financial future?
Although credit card issuers can sue borrowers for not paying their bills, there are multiple ways to avoid it. For example, debt management strategies like consolidating your debt can make it easier to make progress on your debt.
You can also learn more about different debt repayment tactics, like the snowball and avalanche methods.
* To apply for Credit Builder, you must have received a single qualifying direct deposit of $200 or more to your Chime Checking Account. The qualifying direct deposit must be from your employer, payroll provider, gig economy payer, or benefits payer by Automated Clearing House (ACH) deposit OR Original Credit Transaction (OCT). Bank ACH transfers, Pay Anyone transfers, verification or trial deposits from financial institutions, peer to peer transfers from services such as PayPal, Cash App, or Venmo, mobile check deposits, cash loads or deposits, one-time direct deposits, such as tax refunds and other similar transactions, and any deposit to which Chime deems to not be a qualifying direct deposit are not qualifying direct deposits.
1 Information from CNBC’s “What is a penalty APR—and how to avoid it” as of November 6, 2023: https://www.cnbc.com/select/what-is-penalty-apr/
2 Information from Upsolve’s “Can a Credit Card Company Sue Me if I Stop Paying?” as of November 6, 2023: https://upsolve.org/learn/can-credit-company-sue-me/
3 Information from InCharge Debt Solutions’ “What to Do If You are Sued By a Credit Card Company” as of November 6, 2023: https://www.incharge.org/debt-relief/sued-credit-card-debt/