Consumer Law

Judges and Credit Card Cases

By Jeff Sovern

by Jeff Sovern

Suppose you're a judge presiding over cases in which debt buyers--who have bought credit card debt from credit card companies or, often, other debt buyers--sue the credit card holders for the amounts due on the credit card.  You know that virtually no debt buyers can prove their cases (indeed, I'm told that often the contract under which the debt buyer purchased the debt does not oblige the credit card company to provide the underlying documentation needed to prove the debt, or obliges the credit card company to provide such documentation for only a limited number of the debts).  The debt buyers are like poker players bluffing with weak hands.  Consequently, if the cases go to trial, the debt buyer will lose.  You could insist that the cases go to trial.  But that would clog your court up with trials.  In addition, you believe that most of the consumers did incur debts on the credit cards on which they're now being sued, so that they would get a windfall if they win outright.  Moreover, if all judges insisted on trials in such circumstances, consumer debts would become worth even less, which means that credit card issuers would have an even harder time recouping their losses, and that might increase the cost of borrowing or reduce access to credit, or both.  Alternatively, debt buyers might insist on buying the documentation, and that the credit card companies supply the witnesses needed to prove their cases, which would again increase the cost to credit card companies.  So there are long run costs to that approach.  Many of these cases terminate in settlements.  So you could push the parties to settle.  But what kind of settlement is fair?  Often the final charges on the card exceed by a large margin the cost of the items that the consumer initially charged, because of the various penalty fees and charges.  And of course the debt buyers usually purchase the claims for considerably less than their face value, so a settlement at 100% of the amount owed would give the debt buyers a windfall.  So all in all, what's the appropriate role of the judge in these cases?  To do justice?  But what's just?

Full post as published by CL&P Blog on August 15, 2009 (boomark / email).