Can Banks Sue for Non-Payment of Credit Cards?

If a person withdraws money against a line of credit, whether attached to a credit card or not, he is legally obligated to pay that money back -- usually with interest. If the person fails to pay back the money he owes, he can face a number of negative consequences. While criminal charges aren't amonst them, he may be sued in civil court by the company that issued the card.

Credit Cards

Credit cards allow users to make withdrawals against a line of credit held with a financial institution. This financial institution may be a bank or a finance company. Some credit cards are secured by collateral, usually cash; these are known as secured credit cards. Most credit cards, however, are unsecured.

Banks

If a bank issues a client a secured credit card and the client does not make payments, then the bank will draw the amount due, plus late fees, from the client's collateral. If the credit card is unsecured, then the bank may sue the client. A bank will not sue a client on behalf of a credit card company, as it lacks a vested financial interest in the case.

Lawsuits

To collect the money it is owed, a credit card company may attempt a variety of collection methods, including those allowed only with the permission of a judge. To attempt these severe collection methods, the creditor must bring a lawsuit against the debtor. Because the credit card agreement constitutes a legal contract, the basis of the creditor's lawsuit will be that the debtor has violated the terms of this contract and owes the creditor damages.

Account Freezing

If a client of a bank holds an unsecured credit card with the bank, the bank is not allowed to tap any other accounts, such as checking or savings accounts, the client has with the bank unless one of two conditions has been met. First, the credit card contract may legally authorize the bank to take money out of the client's other accounts. Second, a judge, after issuing a judgment in favor of the bank, may grant the bank permission to freeze a client's account and seize money from it.