Texas Laws Regarding Credit Card Debt

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Texas laws impose limitations on creditors as well as on debt collectors seeking to collect a credit card debt after winning a civil judgment against the debtor.

Texas is unlike some other states in that it does not allow creditors to garnish a debtor’s wages.‌ They can, however, freeze a consumer's bank account by court order to collect a debt.

Secured vs. Unsecured Debt?

The main differences between secured debt and unsecured debt are the collateral requirements—secured debts have them; unsecured debts do not. A secured loan is typically a mortgage or a car loan, where the lender can repossess the asset if the debtor doesn’t pay.

Making no monthly payments or making late payments on a secured debt affect a debtor’s credit score and credit report.

Unsecured debt, which credit card debt falls under, is not tied to collateral, ‌so the lender cannot repossess an asset if the debtor doesn’t pay their bill.‌ However, making no payments or making late payments do affect the debtor’s credit score and credit report.

Communication From Debt Collectors

The federal Fair Debt Collection Practices Act requires debt collectors to treat debtors fairly by prohibiting some methods of debt collection. A debt collector can contact a debtor in a variety of ways such as phone calls, mail and fax, but they cannot contact individuals at inconvenient places and times.

The collector should assume that convenient times to contact the consumer is after 8 a.m. and before 9 p.m. local time at the consumer's location.

The debt collector cannot contact the debtor at their job if they know the company disapproves of the contact. The debtor can stop a debt collection company from contacting them by sending a written certified letter requesting them to stop. Once the collection agency receives the letter, they cannot contact the debtor again.

Harassment and Unfair Practices in Debt Collection

Both state and federal laws have rules about harassment and unfair practices from debt collectors when attempting to collect a debt. A debt collection agency may not:

  • Threaten violence against a consumer.
  • Threaten to publish or make public a list of consumers who don’t pay their debts.
  • Repeatedly use obscene or profane language when attempting to collect a debt.

Debt collectors also cannot make false or misleading statements regarding the debt. For example, they cannot:

  • Falsely represent themselves to be attorneys or government representatives.
  • Falsely represent themselves as working for a credit bureau.
  • Imply the consumer has committed a crime.
  • Misrepresent the amount the consumer owes.
  • State that the consumer is being sent legal forms when they are not.
  • Indicate documents being sent to the consumer are not legal forms when they are.
  • State that the debtor faces arrest unless they pay their debt.
  • Give false credit information about the consumer to any else.
  • Use a false name.
  • Send the consumer a document that looks official but is not.
  • Post to social media in ways that are visible to the debtor’s contacts or the public.

A debt collector also cannot use unfair practices when attempting to collect a debt. Some examples of this include attempting to collect an amount greater than the debt, deceive the consumer into accepting collect phone calls, or contact them via postcard.

Statute of Limitations for Texas Debt Collectors

If a debt collection agency or a creditor has not been able to resolve a debt, they can file a lawsuit. The statute of limitations to do so is four years under Texas law. Once the statute of limitations has passed, the creditor cannot file a debt lawsuit against the consumer.

In Texas, the statute of limitations is generally understood to be four years from the last payment made to the original creditor. Once a debt collector files the lawsuit, they must prove to the court that the consumer’s debt is valid and that they owe money.

If the debtor doesn’t respond to the lawsuit, the court will typically enter a judgment against them and award the creditor additional fees to cover interest, attorney’s fees and other costs of collection.

Wage Garnishment and Debt Collection in Texas

Texans are not subject to wage garnishment as a result of not paying a debt; it is prohibited by the Texas Constitution. ‌Only child support, spousal support, student loan debts or unpaid taxes result in wage garnishment,‌ so a debt collection agency cannot collect someone's wages for credit card debt.

In Texas, credit card companies and creditors, in general, cannot take a debtor's home if they claim it as a homestead. A homestead is only subject to a lien when a property owner does not make mortgage payments, does not pay federal income taxes, does not pay money owed to contractors, or defaults on a home equity loan.

Freezing a Debtor’s Bank Account

While Texas does not allow wage garnishment as a method to collect on a debt, it does allow the freezing of bank accounts. When the debtor deposits their wages into a bank account they risk losing those funds if the account is frozen and potentially seized.

To freeze someone’s bank account, a debt collector must win a lawsuit against the debtor and obtain a "writ of garnishment" issued by the court. A creditor can then collect on the debt, provided the debtor has not filed for bankruptcy.

If the consumer does not have a bank account, the creditor has nothing to collect from. As a result of Texas’ strong debtor protections, credit card companies often opt to negotiate a debt settlement with the consumer rather than pursue a lawsuit.

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