Evidence offered by a service company’s employee about credit card account-opening procedures failed to establish that the account agreement included an arbitration clause, or any other terms of the agreement, the U.S. Court of Appeals for the Eleventh Circuit has decided. As a result, the consumer will not be required to arbitrate her Fair Debt Collection Practices Act claim against a debt collector (Bazemore v. Jefferson Capital Systems, LLC, July 5, 2016, Kaplan, L.).
The opinion appears to adopt a rule that a credit card issuer or debt collector cannot enforce any part of a credit card agreement other than an obligation to repay any charges unless it can prove the terms of the actual credit card agreement the consumer personally received.
The consumer submitted an application for a First Bank of Delaware credit card on the bank’s website. She received a credit card and made several charges, the court said, but never paid the balance in full. Some years later she filed for bankruptcy, and Jefferson Capital Systems, which had bought the defaulted account, filed a proof of claim.
When the consumer filed a class action against JCS, claiming that it had violated the FDCPA by attempting to collect a time-barred debt, the company invoked an arbitration clause it claimed was part of the credit card agreement.
Demonstrating an arbitration clause. While arbitration agreements generally are governed by the Federal Arbitration Act, state law contract principles are used to decide whether an arbitration agreement exists, the court began. Applicable Georgia law required JCS to prove both the existence and terms of the arbitration agreement the company said existed. However, the debt collector’s evidence was "woefully inadequate," the court said.
Insufficient proof. The only evidence offered by JCS was the declaration of an employee of Atlanticus Services Corporation, a company that maintained credit card records for the bank. However, he provided almost no information that was specific to the consumer’s account.
For example, while the employee said he had been able to determine that the consumer had applied over the Internet and accepted the account terms, the court complained that he had not explained how he ascertained these facts and had not offered any supporting documentation. More important to the court was that the employee offered no evidence of what the account terms were and no description of what process the consumer actually used to make her application.
"The most that can be said is that she at least implicitly agreed to pay the card issuer or its assignee for any goods or services she charged to the card," the court said. There was no competent evidence about any account terms, including the presence of an arbitration clause.
The employee also said that a Welcome Kit that included the account agreement, with the arbitration clause, "would have been sent" to the consumer within 10 days of her online application. However, while the employee could say that sending the Welcome Kit would have been done in the ordinary course of Atlanticus’s business, he had no personal knowledge and had seen no business records that established it had been mailed, the court pointed out.
Moreover, even if the employee’s evidence were accepted as proof that a Welcome Kit had been mailed, there was no evidence of what that kit contained, the court continued. The employee’s declaration included an exhibit that purported to be a "form of the Cardholder Agreement that would have been sent," but not a copy of the agreement that actually was sent. In fact, JSC conceded that it did not have a copy of the actual agreement.
The employee even was unable to state that the "form of the Cardholder Agreement" was identical to what actually was sent. These agreements change frequently, the court pointed out. JSC had not proved the account terms to which the consumer actually had agreed.
Requirements for enforcement. Courts routinely enforce unsigned credit card agreements when consumers have used the credit cards, the court conceded. However, enforcement requires the lender to provide both proof that the contract to be enforced actually was sent to the consumer and a copy of "the actualcontract" in question (emphasis by the court). Adding that JSC also failed to offer any evidence about the terms spelled out by the Internet site where the consumer applied for her card, the court concluded that the company had failed to prove either the existence or the terms of any arbitration agreement.
The case is No. 15-12607.
Attorneys: Christopher A. Cosper (Hull Barrett, PC) for Christina Bazemore. David Luther Hartsell (McGuireWoods LLP), Bryan C. Shartle (Sessions, Fishman, Nathan & Israel, LLC), and Daniel L. Delnero (McFadden, White, Sprattlin & Davis LLC) for Jefferson Capital Systems, LLC.
Companies: Atlanticus Services Corporation; First Bank of Delaware; Jefferson Capital Systems, LLC
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