Judge Robert A. Mark has served notice on credit card companies that shoddy complaints are not welcome in his bankruptcy court.
In December, Judge Mark wrote an opinion on a case like many others he has tried in the U.S. Bankruptcy Court for the Southern District of Florida. The case centered on Miguel and Rita Chinchilla, who filed a Chapter 7 bankruptcy petition in November 1995.
Mrs. Chinchilla had recently become disabled and lost her job, cutting their income in half.
In February 1996, AT&T Universal Card Services Corp. filed a complaint against the Chinchillas that alleged fraudulent use of its credit card and sought to exempt from the couple's filing the $7,000 they owed it in card debt.
During testimony AT&T learned that Mrs. Chinchilla lost her job before the bankruptcy petition, so the card company dropped its complaint.
But under federal bankruptcy code, AT&T had to justify its complaint. The court ruled that AT&T did not have sufficient evidence to bring the case to court and ordered the company to pay the Chinchillas' court costs.
In his opinion, Judge Mark pointed out that AT&T increased the Chinchillas' $6,500 credit line $2,000 when the couple exceeded their limit by $100 in May 1995. In light of that, the judge said, AT&T's argument that exceeding the limit indicated fraud was "hypocritical."
Judge Mark argued that card companies make their first "meaningful investigation" into a debtor's finances when a bankruptcy petition is filed.
"Credit card companies cannot issue a card without regard to the financial condition and then complain that they were defrauded when they later learn that the consumer had several other debts at the time the card was used," said Judge Mark.
Moreover, he warned card issuers to come into court "armed with facts to prove fraud."
AT&T would not comment on the case but a spokesman for the company, Mitch Montagna, said its strategy is to recover investors' dollars where appropriate.
"The cost of credit to the overall public is affected by losses," said Mr. Montagna.
He said most of AT&T's litigation efforts have been successful.
