Contesting Credit Card Debt Lawsuits: Bad Idea Jeans from Reuters

Felix Salmon, a blogger for Reuters, suggests that all consumers should contest credit-card lawsuits.

His advice has moments of validity: as we’ve seen with Bank of America and its credit card arm, creditors can often coerce collection agencies into pursuing debts that aren’t valid — placing the collection agency into more peril than Bank of America thought it would be in itself.

If the debt actually isn’t valid, then it makes sense for a consumer to contest a lawsuit.

However — where Salmon’s advice gets a little fishy (a-ha-ha! Did you see what I did there? I’ll just see myself out…) is when he goes on to say, “Borrowers should not shy away from asking for this proof out the moralistic feeling that they should pay back what they owe.”

That’s a troubling roadmap, and not in the best interest of a score of people not directly related to the consumer:

• The creditor, who loaned its money to the consumer for the consumer to purchase…whatever. (For example, I may have recently used my personal credit card to buy a bunch of unnecessary t-shirts from the Gap. However, I plan to pay off that purchase before the month’s out.)

• The collection agency, who is now having to deal with an oddly entitled consumer who thinks he’s no longer ethically responsible for the debt he incurred.

• All the consumers who actually pay their credit card bill on time.

• All the consumers who have to deal with higher prices due to the repercussions of bad retail debt.

Salmon also gets sloppy with his conclusion: “If people start contesting these suits en masse, then that will surely reduce the attractiveness, to the banks, of selling written-off debt to sleazy collections agencies en masse.”

Except it’s unfair to categorize all collection agencies who purchase credit card debt as “sleazy.” It undermines an important part of the receivables management industry, and undercuts an industry that puts people to work in all kinds of economic environments.

Be sure to read through the comments on the blog post as well. There are some winners (he said, with a sarcastic eye-roll).