Credit Card Debt Is Unconscionable

Some eyebrows were raised recently when Cleveland Municipal Judge Robert Triozzi threw out Discover Bank's attempt to collect on an unpaid credit card debt of Ruth Owens. The judge ruled that the actions of Discover in trying to collect about $9,000 on a $1,900 debt were unconscionable. Some observers believed the ruling had no legal basis and felt the judge was trying to gain favor with the public.

In the case, Judge Triozzi determined that Discover had been unreasonable by the way they allowed the debt to multiply even after it became known that Ruth Owens had no ability to pay. She was unemployed and on Social Security Disability yet still tried to pay the debt. Unfortunately, though, it inched above the $1,900 overlimit threshold and she was forced to pay additional overlimit charges of $20 to $29 per month. She was also charged for a feature called CreditSafe which supposedly puts all payments and fees on hold if you're unemployed, disabled or hospitalized. Discover charged her for CreditSafe by deeming her unemployment and disability as preexisting conditions.

Although some questioned the basis for the ruling, Judge Triozzi was acting in accordance with the law. According to Gregory Travalio, law professor at Ohio State University, contracts may be ruled unconscionable if there was unfair bargaining and the terms are deemed unreasonable.

By having a person sign a long-winded contract written in microscopic legalese, it's hard to support the contention that the person fully understood all elements of the contract. Therefore, it's difficult to say the bargain was fair. And, by having someone pay $9,000 for a $1,900 debt sure seems to stretch the definition of reasonable. In fact, it's awful close to loan sharking.

In summary, Judge Triozzi's ruling has a valid basis in law, however, it's not clear what will happen on appeal.