Case Study: Asserting 15 U.S.C. § 1666i to Defend Against a Medical Credit Card Collection Lawsuit

Case Study: Asserting 15 U.S.C. § 1666i to Defend Against a Medical Credit Card Collection Lawsuit

Background

In 2023, a consumer in Louisiana was sued by a national debt buyer seeking to collect over $7,000 on a defaulted medical credit card account. The account was originally issued by a specialty financing company through a major bank and used to prepay $9,000 for three dental implants. The consumer obtained the credit through her treating dentist and was promised that the entire dental procedure—including all three implants—would be completed under a bundled price agreement.

However, after completing only two implants, the dentist unexpectedly closed his practice and became unreachable for a time. Despite failing to render the full agreed-upon service, the dentist had charged the entire $9,000 upfront to the patient’s credit card. With no refund issued and no means to access the dentist after closure, the consumer ceased making payments, triggering a charge-off and sale of the account to a third-party debt buyer.

Legal Framework: 15 U.S.C. § 1666i Defense

Section 1666i of the Fair Credit Billing Act (FCBA) permits cardholders to assert “all claims (other than tort claims) and defenses” against the card issuer stemming from a credit card transaction—provided certain conditions are met. This provision becomes particularly important in scenarios where the consumer has a contractual grievance against a merchant and is sued for nonpayment.

The key elements required to invoke the § 1666i defense are:

1. A non-tort claim or defense against the merchant;

2. A transaction amount over $50;

3. A good-faith attempt to resolve the dispute with the merchant;

4. The transaction must have occurred in the consumer’s state or within 100 miles of the consumer’s billing address;

5. The consumer must have not yet paid in full at the time the dispute was raised.

Application to the Case

All five statutory elements were present:

• The consumer’s claim against the dentist was contractual in nature: the agreed-upon services were not fully delivered.

• The $9,000 transaction amount far exceeded the $50 threshold.

• The consumer repeatedly attempted to contact the dentist, first unsuccessfully and later through text messages over several months, in an effort to resolve the dispute.

• The dental office was located well within 100 miles of the consumer’s home.

• The consumer ceased payment before the balance was fully paid, maintaining an unpaid balance on the account when the dispute was asserted.

These facts provided a textbook basis for asserting a § 1666i defense to the debt collection claim.

Additional Layer: Arbitration Clause

The cardmember agreement included an arbitration clause providing that the creditor—or its assignee—would cover the consumer’s arbitration fees if a written request were submitted. The consumer, who lacked income or assets sufficient to pay arbitration fees, invoked this provision and demanded arbitration, citing the applicable language from the agreement.

This dual strategy—raising § 1666i as an affirmative defense and invoking arbitration with a demand that fees be paid by the creditor’s assignee—strengthened the consumer’s position significantly. It created both procedural and substantive hurdles for the debt collector.

Strategic Takeaways

1. § 1666i remains underused in debt collection litigation but provides a viable defense when consumers face lawsuits over transactions tied to defective merchant performance.

2. Consumers and their advocates must document attempts to resolve disputes with merchants—text messages, emails, or complaints to licensing boards may all help establish the “good faith attempt” required under the statute.

3. Third-party debt buyers stand in the shoes of the original creditor and are subject to defenses available under the original contract, including those afforded by federal law.

4. Cardmember agreements that require arbitration and shift costs to the creditor in cases of hardship can be used to further deter or delay collection efforts.

5. Even when the consumer is judgment-proof, asserting legal defenses can lead to dismissal or favorable settlement, preserving credit and deterring future collection attempts.

See: Asserting 15 U.S.C. § 1666i as a Defense in Credit Card Collection Lawsuits
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Thomas Fox, J. D.
Fox Paralegal Services
Lake Cumberland, Kentucky
thomas@foxparalegalservices.com

TEXT ONLY: 502-230-1613
Voice: 606-219-6982


Disclaimer:
This information is for general educational and information purposes only and should not be taken as legal advice. I am not a lawyer. I can provide legal information but not advice. The difference is that legal information is equally applicable to everyone. Legal advice is tailored to your specific situation, and it is based upon a personal relationship of trust between you, as a client, and a lawyer. Your communication with a lawyer may be privileged and protected by law. Your communications with me are not. It is advisable to consult with a qualified attorney in your specific jurisdiction for guidance on your legal rights and obligations. The laws of every state are different. Consulting with experienced local counsel is essential. If you are involved in litigation, I urge you to seek legal counsel.