Pre‐Emption of Credit Card Lawsuits
General description of the issue
Preemption of Credit Card Lawsuits is a widespread phenomenon in numerous countries. When a credit card holder has an overdue debt and fails to pay it in time to the credit card company, the concerned company might file a lawsuit against the card holder to provoke payments. Alternatively, the credit card company might sell the debt to a different entity (debt buyer) who pays a nominal/actual amount for the debt held in the card (purchases the debt) and files a lawsuit on behalf of the credit card company (lawsuit preemption) to recover entire payments from the card holder. Precisely, preemption in this context is where a debt buyer purchases the debt owed in the credit card and sue the credit cardholder (Maeda, 2011). The credit card company does not file the case but another party (a debt buyer) purchase the debt owed at a nominal or actual cost and files a case (lawsuit) against the credit card holder claiming massive benefits including the interests and other charges owed in the card. The taking over of the credit card lawsuit from the actual credit card company to the debt buyer is what forms the lawsuit preemption phenomenon in this context.
The debt buyer preempts the case from the credit card company, which only received its actual money. In this context, in case the debt buyer (company purchasing such debts and files the case against credit card holder for payments) wins the lawsuit, it will earn the entire compensations or benefits plus the principle mount owed in the credit card. Simply, the process (preemption) transfers responsibilities of filing cases against bad credit card debtors. The concerned credit card company no longer claims the payments but bestow all the court rights to the debt buyer who bought the debt at its nominal cost. There are various laws that allow for this provision in the realms of debt transfer (Kennedy, 2008). This is evident in US, UK, and other countries globally, which embrace credit card facilities and has enacted laws to govern such cases.
Conversely, in case the credit card holder wins the case against the resultant plaintiff (debt buyer who preempted the credit card lawsuit), the debt buyer will go at lose while the credit card company will suffer no remarkable losses. For this matter, it is the mandate of the debt buyer to collect enough evidence against the credit card holder in order to win the preempted lawsuit for compensation (Buzbee, 2008). Usually, the debt buyer claims the complete amount owed to the original creditor (credit card Company) as claimed earlier in this context. Preemption of lawsuits is a common phenomenon especially in the credit card industry. There are some debtors who hardly pay back the amount used in the card. Usually, the credit card company should file stringent lawsuits against such cardholders. However, since this might be a process and the risks involved are numerous, it is better to sell the debt to another buyer who can file the lawsuit and claim the entire payments.
Since the core business of the credit card company is not to sue bad debtors or credit card defaulters, this fact might force them to sell out the debts at a reduced cost despite the inability to capture the interests owed and other relevant charges against the concerned credit card defaulter. This is an applicable phenomenon in various occasions (Kennedy, 2008). It eases the processes involved and allows lawsuit professionals to assume duties in the correct fields. For example, debt buyers have competent lawyers who can file the concerned lawsuits and argue them in favor of the concerned debt buyer. This is an important phenomenon in various contexts. The aspects of specialization are evident in this scenario. Additionally, the credit card company has limited chances of losing its money due to bad debts. Evidently, most of the credit card holders fail to pay their debts in time due to economic hitches. For this matter, there are penalties and cumulative charges that might render the debt even more expensive to pay.
Consequently, there are so many defaulters with regard to the matter. Despite the condition, it is logical for such debtors to payback the debt and clears what they owe the credit card company. A challenging situation comes when such debtors are unwilling to pay the debt owed forcing the credit card company to use other means of collecting the owed amount (Maeda, 2011). One of these ways includes the filing of lawsuits against the debtors to induce payments of the principle amount, interest, and other relevant penalties bestowed on the defaulted credit card. This is process as indicated before and might force the credit card company to sell the debt to another debt buyer at an agreed cost (always at the actual cost). From this context, it is evident that numerous issues might emerge with regard to lawsuits filed in such instances. Consequently, there is need to follow right protocols of retrieving the money from the credit card holder. It is not easy to win such cases thus credit card companies do not want to take risks of going through the court processes. The only recommendable option is to sell the debt and preempt the lawsuit to the appropriate debt buyer as indicated before. State and federal laws have allowed these moves and give debt buyers full powers to file such lawsuits. From that context, the law protects debt buyers. However, they must argue the case appropriately in order to win the filed lawsuit. If this does not happen, they will lose the case and incur massive losses with regard to the matter.
Pros and Cons from a legal and business/professional perspective
There are numerous pros and cons regarding this credit card lawsuit preemption phenomenon. Usually, the concerned stakeholders can either gain or lose in a given manner. Precisely, it is either advantageous or disadvantageous to each of the concerned stakeholders. An advantage to a given party might be a disadvantage to another (Kennedy, 2008). For example, when the debt buyer loses the filed lawsuit, the credit card company will be advantaged since it had sold the debt earlier hence incurring no loss. Conversely, in case the debt buyer wins the case and payments are made, it will be advantaged since it will receive the actual cost of the credit card, interests charged on it, and the penalties bestowed on the given debt. Conversely, the credit card company will be at a disadvantage since it will have not recovered the interest charges, which it was suppose to get, the penalties it charged on the card, and other relevant benefits it was to get in case it filed the lawsuit by itself. It is crucial to consider these provisions with due precision and scrutiny.
Pros
Preemption of credit card lawsuits is advantageous in numerous contexts as indicated earlier. Firstly, it is evident that it delegates responsibilities and reduces the aspects of business risks to the concerned companies or entities. From this context it is possible to attain the merits characterizing the phenomenon. Firstly, preemption of credit card lawsuits prevents credit card companies from incurring undue losses with regard to the matter. Credit card companies are proactive and always try to avoid incurring losses at all cost. Additionally, filing the lawsuits might be costly in terms of hiring lawyers, paying court charges, time consumed, and other relevant costs involved in the matter (Buzbee, 2008). For this matter, it is appropriate to preempt the lawsuit and recover the nominal/actual charges owed in the credit card. This is better than losing everything to the credit cardholder. The fact that the credit card company will not indulge in the court cases by filling lawsuits with regard to the matter is equally advantageous. Additionally, it is recommendable to clarify the matter with the concerned parties to unveil whether the debt can be recovered or not. Bad debtors hardly pay their debts thus forcing the concerned companies to incur unnecessary losses in the realms of business operations and income.
Another advantage is that debt buyers in this syndicate will gain massively in case they win the case. Obviously the entire preemption phenomenon is possible since both parties (debt buyer and Credit Card Company) anticipate gaining from deal. As indicated before, the credit card company will avoid incurring unnecessary losses fronted by bad debtors. Conversely, debt buyers anticipate attaining massive compensations from the concerned lawsuit in case they win. Hence, the preemption quest is advantageous to both parties involved. Evidently, the law protects businesses from incurring losses from bad debtors (Maeda, 2011). Such debtors can be taken to court to answer a lawsuit filed against them. Additionally, numerous individuals have fallen victims of bad debts either in the credit card context or any other place. Hard economic challenges are contributors to these factors following the increased inabilities of common people to settle their debts. This has increased the need to have more secured debt provisions and other organs that can help businesses retrieve their monies from the concerned debtors. This has called for the mentioned lawsuit preemption phenomenon. Precisely, preemption of lawsuits helps in preventing undue loses as indicated before.
Another pro in this context is that there is a possibility of handling the filed lawsuits by professionals who can easily win them. If a credit card company solely files the case, it might lose tremendously following the inadequate expertise and cost involved in the lawsuit execution. In order to avoid this happening, it is important to preempt such lawsuits and gain considerably from the entire phenomenon. It is the mandate of almost every party in this phenomenon to seek for viable bargaining opportunities. Ability to file the cases appropriately will allow both companies to retrieve the due debts from the concerned credit card holders. Another lawsuit preemption advantage is that it allows the credit card company to concentrate in its core business rather than hovering around chasing bad debtors. This gives the company considerable time to manage its affairs while incurring limited losses in the entire phenomenon. Evidently, credit card companies are not in the business of chasing debtors. Additionally, they can file the lawsuit but lose the case leading to doubled losses in the realms of paying lawyers and losing the entire card debts (Buzbee, 2008). This is a detrimental repercussion, which any focused business should not face. Another advantage is that since the debt buyers are in business, such credit card lawsuit preemptions promotes their prosperity. There must be such preemptions for them to have what to do. If not, their business will slump. Additionally, they are able to put pressure on bad debtors hence reducing debt occurrences within the state. Consequently, credit card holders fear their debts being bought by debt buyers for severe lawsuits and fines. Thus, they pay their debts in time.
Cons
Evidently, preemption phenomenon has numerous demerits to the involved parties. Firstly, it is possible that the debt buyer can lose the case hence lose money for no apparent reason. This is a massive risk and challenge to the concerned company following the immateriality of the lawsuit involved. Some credit card holders who default with their payments have viable reasons for their deeds. These might favor them in winning the case. Consequently, the concerned debt buyer will be the one to lose in the entire preemption syndicate. Another evident disadvantage is that the credit card company forgoes all the interests and penalties it was to charge against the credit card holder. It is from this context that the mentioned cons lie. This means that the business will not make remarkable profits since all its dues (interests, penalties, and other fees) will be waivered in favor of the debt buyer. This is detrimental to the business. Additionally, in case the preempted lawsuits delay, the debt buyer will lose money on other avenues and the delays caused by the court (Kennedy, 2008). In fact, the credit card holder can equally sue the debt buyer on other relevant grounds thus leading to further lose of money. Delegation of debt responsibly is an important phenomenon since it allows the concerned firms to make critical deals in the matter; nonetheless, in case the expected results are not achieved, the concerned stakeholders will be disadvantaged when considered legally and business wise.
Another disadvantage is that since the credit card holder will be dealing with a different entity (debt buyer) apart from the one they had a contract with (credit card Company), he or she is likely to incur numerous charges in case the lawsuit is ruled against him or her. This quite detrimental to the debtor who could not even pay the fundamental fees charged on the concerned card. Preemption of credit card lawsuits is important in delegating debt collection duties; nonetheless, it is quite detrimental to all the parties involved. It is not an easy task since all the parties can argue their case against each other t o win the case. In case the lawsuit do not assume a fair hearing, it is possible to charge the credit card holder wrongly or rule the case against the debt buyer unduly. This might be scandalous if not scrutinized properly. Precisely, it is important to argue that the mentioned disadvantages render the entire lawsuit preemption phenomenon unprofitable to all the parties. Any party can either lose or gain.
Personal position on what is perceivable right and why
From a personal viewpoint, it is agreeable that preemption of credit card lawsuits is a necessity and should continue following it advantages to the concerned credit card companies and debt buyers in case they win the concerned cases. Handing over such case to experts who can handle them successfully with precision is important not only to the business but also to the financial growth and reduction of bad debts. Since both state and federal laws have provisions protecting credit card companies from incurring undue loses, it crucial to augment this provision by selling bad debts to other individuals who can trace them precisely by filing relevant lawsuits in court (Maeda, 2011). Importantly, the concerned credit card company receives its nominal debt/money hence do not incur substantial losses in the entire phenomenon. It is from this context that the entire business operations gain their profitability and financial security demanded. Precisely, it is right and considerable to preempt credit card lawsuits in order to recover the due debts proficiently. Debt buyers have the ability and the required legal expertise to retrieve the concerned debts from credit card holders. This is an important phenomenon in the context of debt recovery and other characterizing factors.
Additionally, it is right for the credit card holders to pay back their debts before it reaches a court case or lawsuit level. The ability of some debtors (credit card holders) to abandon their designed mandates of repaying back the concerned debt usually necessitates the credit card lawsuits’ phenomenon. Since the credit card companies can hardly chase such debtors due to the inconveniencies and costs involved, selling such debts to appropriate debt buyers is an important phenomenon. It is crucial to consider such moves lucrative and economical (Maeda, 2011). Preempting law suits is beneficial in numerous contexts. It is the mandate of the concerned companies to consider how they will benefit from the deal before letting everything go. Additionally, since filing lawsuits require professional lawyers who might be expensive to the credit card company to higher, it is inappropriate to solitarily pursue court case since there are higher chances of losing the concerned case to the defendant. This relates to the pros discussed earlier in this paper.
Accordingly, lawsuit preemption is vital in numerous contexts. Debt buyers play a critical role in this context. By accepting to pay debt at a nominal cost and pursue the case further, they help in numerous ways especially to companies who deal in credit cards. Allowing such provisions to occur is crucial despite the risks and challenges involved. A debt buyer might fail to recover its money when it loses the case (Buzbee, 2008). Despite this, there are bountiful chances that the company might win the case and benefit massively from the case. Just like any other business, some lawyers and businessmen have deemed it fit to make business from credit card defaulters. Inability to repay back the credit card debts plus their interests and penalties renders one a credit card debt defaulter. The aspects of lawsuit preemption complicate the issue even further due to its unfriendly outcomes to any of the parties. Despite the situation, it is improper to hold a credit card and fail to pay its dues. In case the credit card company cannot sue the credit card holder successfully, it is advisable to preempt the lawsuit comprehensively.
References
Buzbee, W. (2008). Preemption choice: The theory, law, and reality of federalism’s core question. New York, NY: Cambridge University Press.
Kennedy, C. (2008). The business privacy law handbook. Massachusetts, MA: Artech House.
Maeda, M. (2011). How to legally settle your personal credit card debt for pennies on the dollar: Without filing bankruptcy. Florida, FL: Atlantic Pub. Group.