When it comes to collecting credit card debt, Texas laws impose extreme prohibitions on creditors seeking to collect a debt, even if the credit card company gets a civil judgment against a debtor for a legitimate debt. Unlike most states, which permit private creditors to garnish wages and other income, Texas law permits credit card companies an extremely limited number of legal options to collect post-judgment debt. For this very reason, many debtors in Texas are described as "judgment proof."
Secured v. Unsecured Credit
It's important to understand the difference between secured debt and unsecured debt, such as that owed to a credit card company. Secured debt is a debt that you take out for a specific tangible item, such as a car, home, furniture or a household appliance (refrigerator, washing machine or dryer). If you default on a secured debt, the item can be repossessed. A bank can foreclose on your property, a car dealership can take back a car, and a local business can obtain other goods sold to you on credit through the store, such as household appliances or furniture. However, unsecured debt is debt accrued through credit card purchases for a variety of goods and services. A credit card company cannot repossess any item that you purchased. To collect a debt, the credit card company must file a suit against you in court for the money you owe.
Wages cannot be garnished by a credit card company in Texas. Most states allow private creditors to take up to 25 percent of a debtor's disposable weekly earnings or 30 times the weekly federal minimum wage (in conformation with Title III of the Consumer Credit Protection Act) after the creditor gets a civil judgment against the debtor. Texas is one of a handful of states that opted out of federal law authorizing states to allow credit card companies to garnish income. In Texas, the only type of wage garnishment will typically be when child support is in arrears. Also, the federal government may garnish wages for back taxes owed or a student loan in default.
Can a Credit Card Company Take My Home?
In Texas, a credit card company cannot take your home or place a lien against it if you claim it as a homestead. In Texas, the only time a homestead is subject to a lien is when the homeowner fails to make mortgage payments, owes ad valorem or federal income taxes, fails to pay a contractor (in which case the contractor can place a mechanic's lien on the property), or defaults on a home equity loan.
The only legal way a credit card company can collect a debt post-judgment is to garnish the money in a debtor's bank account (provided the debtor has not filed for bankruptcy). If the debtor has no bank account, the creditor has no way of enforcing a civil judgment. Given the strong protection given to debtors in Texas, most credit card companies opt to negotiate the amount of a debt rather than pursue a judgment in court.
Harassment of Debtors
The federal Fair Debt Collection Practices Act prohibits credit card companies from engaging in illegal methods of debt collection, harassment or threats. However, the state of Texas strengthens debtor protection by applying its own set of laws. For example, a credit card company cannot threaten to garnish the wages of a debtor or take a debtor's home. A credit card company or collection agency representing it cannot make repeated calls that cause a phone to ring consistently, nor can the creditor threaten to charge the debtor with a criminal act. Any creditor who engages in any of the behaviors in Chapter 392 of the Texas Finance Code is guilty of a misdemeanor offense, punishable with a fine of $100 to $500 per violation, as long as the charges are filed within a year that the illegal action takes place. Additionally, the debtor can seek an injunction from the court against a creditor and sue for actual damages.
Reporting Credit Card Company Harassment
If you are illegally harassed or threatened by a credit card company or third-party agency representing the company, or if the credit card company engages in any of the collection methods listed in the Texas Finance Code, contact the Texas Attorney General's Consumer Protection Hotline at 1-800-621-0508 or the Consumer Assistance Hotline of the Office of Consumer Credit Commissioner at 1-800-538-1579. You can also file a complaint against the creditor with the American Collectors Association of Texas.