Credit Card Grantors How to Avoid Unnecessary Trials

Credit Card Grantors – Avoid Trials

Use the TILA to your advantage.


John: Our attorney, Liz, just advised us that the debtor filed an answer disputing the debt. She says that we will have a trial in about 9 months and will need a witness.

Jane: Why can’t Liz make a motion for summary judgment? We have no record of any dispute in the past. We only have broken promises.

John: Liz told me that since the debtor disputes the balance and we do not have a copy of the original agreement signed by the debtor or the signed charge receipts, there are several issues of fact and the Judge will not grant our motion.

Can they avoid a trial? One solution is a summary judgment motion. This motion is an application to the court that the Creditor is entitled to judgment because no facts and no law support their case. This article will set forth how to eliminate the debtor’s factual defenses and establish a legal basis for winning the motion. In short, a trial can be avoided if the Creditor provides the necessary documentation and their attorney drafts the court papers as set forth below.

Creditor’s Duties

The creditor must provide its attorney with the following documentation:

(1) The Terms and Conditions for the credit card agreement along with the mandatory TILA disclosures; (You do not always need the signed application);

(2) Copies of statements for a period of approximately 12 monthly demonstrating usage (charges, cash advances, payments);

(3) A copy of the reverse side of a “typical” statement setting forth the mandatory disclosures (This information is helpful, but not always essential); and

(4) An affidavit from a qualified party that it is their normal business practice to send monthly itemized billing statements to its customers, including the debtor, and that they have not received any timely written disputes as to the balance due from the debtor.

Drafting the complaint

When drafting the complaint, most attorneys plead a theory of breach of contract. By choosing this course, a debtor can defeat a motion for summary judgment by alleging that no signed agreement has been provided by the creditor. A better method is to plead that the Plaintiff agreed to permit the defendant to make purchases on credit or obtain cash advances by using its Credit Card, to be repaid in installments. The Plaintiff advanced monies to the Defendant. The defendant defaulted by failing to repay said moneys.

Thus, the case is transformed from an action for breach of contract to an action for monies loaned/unjust enrichment. In many states this artful form of pleading enables a creditor to be successful without producing a copy of the signed agreement because it is no longer becomes an essential piece of evidence to prove your case. Instead of relying on the agreement, you rely on the debtor’s course of conduct. This conduct establishes the agreement.


1.) Use the terms and conditions and the statements to establish a course of performance and a binding agreement.

All credit card agreements are regulated by the Truth in Lending Act. This statute sets forth responsibilities for both the creditor and the debtor. Every credit card agreement contains a paragraph stating that use of the card triggers liability under the agreement. Usage is established by referencing your proof: i.e, statements for a period several months indicating charges, cash advances or payments. Thus, the creditor has now established an agreement by performance.

The creditor must allege in its affidavit that it was their normal business practice to mail itemized monthly billings statements to its cardholders, including the named debtor, and that the debtor retained the statements without objection in writing for over 60 days from the date of the disputed statements. The debtor’s acceptance of the charges can be inferred from the fact the debtor continued to use the credit card, made partial payments, and never attempted to cancel the agreement during the period, despite having received the statements for several months.

2.) The legal argument.

Pursuant to the terms and conditions of the credit card agreement, and pursuant to 15 U.S.C. Sec. 1666 and Regulation Z Subsection 226-13(b)(1)-1 of the Truth in Lending Act, a Debtor has 60 days from receipt of disputed charges to notify the creditor in writing of billing errors to preserve the debtor’s rights. If the Defendant fails to object in writing pursuant to their right to dispute the bill, s/he have waived the right to dispute the balance due. Minskoff v. American Express, 98 F.3d 703, (2nd Cir. 1996).

[Once a cardholder has established a credit card account, and provided that the card issuer is in compliance with the billing statement disclosure requirements of 15 U.S.C. 1637, [FN4] the cardholder is in a superior position to determine whether the charges reflected on his regular billing statements are legitimate. A cardholder’s failure to examine credit card statements that would reveal fraudulent use of the card constitutes a negligent omission that creates apparent authority for charges that would otherwise be *710 considered unauthorized under TILA. See Transamerica, 325 N.W.2d at 215.]

This negligent omission to dispute any charges in a timely manner prevents the debtor from disputing the charges at this later date. Thus, Defendant’s course of performance of using the card and/or making partial payments demonstrated a willingness to repay the obligation. The debtor is aware of this duty to review because it is set forth in both the Term and Conditions and printed on the reverse side of every credit card agreement.

The TILA Rule is similar to the common law theory of “account stated” which requires that a debtor receive statements for a period of time, does not object to the charges and indicates a willingness to repay the debt. Consequently, it is far easier for the creditor to prove its case under the TILA Rule. First, the creditor is not required to establish that the debtor possessed an intent to repay the debt. The burden of proof is shifted to the debtor to establish that s/he properly disputed the debt in writing and in a timely manner (60 days).

The creditor is not required to produce signed charge receipts if the debtor did not timely dispute the charges. In today’s economy many charges take place without a signed receipt. For example, online purchases (airline tickets) and telephone purchases (telemarketing sales) never produce a signed receipt. Thus, the defense will fail so long as the creditor can establish that it complied with its TILA obligations.

In most cases a motion for summary judgment will be successful if the attorney pleads the case as described above and if the client can supply the necessary documentation. Even if the summary judgment motion is not granted, in many cases, the motion itself generates settlements because the debtor’s attorney has to perform work to oppose the motion, which costs money, that the debtor does not want so spend.


Copyright © 2000, 2001 Winston & Winston P.C. All rights reserved.
Revised: March 19, 2005