How Capital One and Midland Credit Management Sue You

After covering JP Morgan Chase’s decision to forgive the credit card debt of its Canadian cardholders, I wanted to focus on one of the other big (but often overlooked) credit card stories of our time–the aggressive enforcement efforts against those with credit card debt taken by Capital One and Midland Credit Management. 

If you are someone who struggles to pay your credit card bills on time, you should stay far and away from Capital One. To understand why, I strongly suggest that you take a read of “At Capital One, Easy Credit and Abundant Lawsuits” that documents the number of lawsuits filed in connection with Capital One credit card debt. 

In one study of a Las Vegas Justice Court over a multi-year period, 56,054 lawsuits were filed by Capital One for credit card debt. The next closest was Citi with 15,579, Discover with 14,666, before dropping off to Bank of at 8,832. This data point was not merely a function of size, as Capital One is only the fifth largest credit card lender in the Las Vegas area despite filing 4x as many lawsuits for overdue credit card debt as its next closest competitor. Some of the variance can be explained by the fact that Capital One borrowers have a 32% higher default rate than the typical borrower at large, but that alone does not account for the higher number of lawsuits filed. 

Very few people know about this, but Capital One runs a partnership with Experian through its PowerCurve Collections to figure out exactly how to collect money from an overdue credit card holder. If you live in, say, St. Louis County, Missouri and have a $4,300 credit card balance, the PowerCurve Collections software service will scan the publicly available real property and personal property records to make an educated guess as to whether you own a house and car, how much debt is secured against it, and how much equity you have in your home and personal property. They also operate a network of banks that identify where you are likely to maintain a bank account.

This is relevant because, although credit card debt is “unsecured” and cannot lead to a claim against your home, car, or bank account by itself, an unsecured debt becomes a secured debt once it results in a legal judgment. That is to say, when you are sued over a debt and a judgment is entered against you to pay the debt, the $4,300 balance mentioned above now becomes a “judgment lien” that attaches to any real property you own in the county where the judgment was rendered against you. In addition, there a registration process for the debt to attach as a lien to your homes in any other state or county due to the Uniform Enforcement of Judgments Act (which every state except California, Vermont, and Massachusetts follows). There are also registration processes for the payment to become a lien against your car in certain states. In all states, it is also possible to garnish wages pursuant to a judgment. 

Long story short, Capital One knows where you own, what you drive, and where you bank at the time that it files suit against you for overdue credit card debt. Other times, it works in connection with its preferred partner Midland Credit Management, LLC in which it sells your overdue credit card debt to Midland Credit Management, which gives them an assignment to collect the debt that you owe to them. Generally, the fewer assets you have and the harder it is to collect against you, the more likely that Capital One will sell your debt to Midland Credit Management (MCM) to collect against you.

Now, here is where things get interesting. In approximately 89% of the cases, Capital One or Midland Credit Management will file suit and collect a default judgment against you. This means that, after paying filing fees and hiring an attorney to obtain the default judgment, either Capital One or MCM will be in a position to attach a lien to your house or garnish wages from your bank account. They assume that the credit card holders that it sues will either be unfamiliar with the judicial system and not show up to court at all or they’ll have a vague sense that they owe the credit card debt and figure there is nothing they can do. 

This view is unfortunate because Capital One is not only aggressive about its collection efforts but it is so heavily reliant upon debtholders not showing up to court that it is often sloppy with the required paperwork necessary to collect upon a debt. When Capital One attempts to collect on a credit card debt, the debtor is allowed to demand “strict proof” that the debt is due and owing and in many states is even legally entitled to bring in a representative of Capital One to an evidentiary hearing to go over the total amount borrowed and to confirm the accuracy of each payment. In recent history, Capital One has struggled to produce a representative in court because the cost of doing so is often not worth the potential upshot.

For matters involving debt that is sold to Midland Credit, the debtors can often raise what is called a “lack of standing” argument where Midland can be demanded upon to prove via certified records that it received the assignment and also a Capital One representative can be required to provide strict proof of the underlying debt as well. In all cases, this would be an expensive endeavor for Midland Credit and in some cases Midland Credit may not even have the proper documents to prove it has standing to enforce the debt as seen in the recent New York Court holding in Midland Funding, LLC v. Coia

The problem for many people in debt is that hiring a lawyer to fight the required elements necessary to establish the proof of debt may cost several thousand dollars which may defeat the purpose of victory if the credit card debt in dispute is a similar amount. Still, it highlights a problem with the debt collection industry that it is entirely reliant upon overdue debtors being uninformed about their legal rights. When people are sued for overdue credit card debt, showing up and disputing the debt (either demanding an evidentiary hearing to provide strict proof of the debt or to prove Midland Credit Management’s standing to enforce Capital One debt) can lead to surprisingly favorable outcomes for the debtor. 
N.B.: The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. 

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