John S Kiernan, Managing Editor
Yes, credit card companies can indeed garnish your wages, but they typically need a court order to do so. They also have the power to place a levy on your bank account, if they find you have the assets necessary to pay what you owe, with the proper legal authorization.
In most respects, credit card wage garnishment is largely the same as any other type of wage garnishment – such as those stemming from unpaid loans and other commercial debt. Government garnishment, such as in cases of overdue taxes, child support or alimony – is a bit different, since otherwise off-limits income can be garnished and since a court order is not needed. You can learn everything you need to know about the standard wage garnishment process, both for commercial and government debt, in WalletHub’s Wage Garnishment Guide.
There are, however, a few ways in which credit card wage garnishment differs from other types of wage appropriation:
Choice of Venue: Many credit card user agreements contain language dictating the jurisdiction in which legal proceedings related to the account will be heard.Cases may be directed to the state in which the issuer is headquartered, the state in which the account was opened, or the state in which most of the debt was incurred. Or, it may be the credit card company’s choice.
Whatever the circumstance, you can be sure that your credit card company will be operating in its own best interest in making this decision. It will orchestrate things so it has the most favorable legal conditions possible. This may prevent you from invoking helpful state exemptions. However, these clauses aren’t always enforceable in court, since state judges don’t really care for them.
Binding Arbitration: Credit card agreements also dictate that any disputes related to an account will be subject to binding arbitration rather than actual court proceedings. This includes questions of wage garnishment, as an arbitrator’s ruling is enforceable in court. In other words, your issuer can bypass a judge to get its hands on your paycheck – especially worrisome given the conflict of interest concerns related to credit card arbitration.
Your Debt Will Probably Be Sold: Unlike federal or state debt, in particular, past-due credit card balances are likely to be sold to private debt collection firms. It’s simply more profitable for credit card companies to cut their losses rather than pursue expensive legal action.This may result in either opportunity or increased difficulty.
On the one hand, private debt collectors are notorious for lacking the documentation necessary to legally pursue old debt. Asking them to verify your debt, or raising the issue of improper records in court, could therefore be the end of your problems. However, private debt collectors don’t necessarily have the same image concerns as large financial institutions or state and local governments, so they are more likely to act unscrupulously.
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