7 March 2024 / Laura E. Alms / Casey B. Hicks

Fraudulent Credit Card Accounts in Illinois: A Coffee With Casey Recap

Welcome to the recap of our #CoffeeWithCasey webinar! Our first episode of 2024 (and the ninth episode overall) covered claims of fraud and identity theft in Illinois credit card suits. 

In this episode, shareholder and Chicago office managing attorney Casey Hicks sat down with attorney Laura Alms. Drinking a cup of coffee from Dark Matter Coffee, one of her favorite Chicago coffee shops, Casey talked with Laura about the specific requirements that apply in Illinois when fraud or identity theft is alleged in credit card litigation. 
Watch the recorded webinar here or read some of our top takeaways below.

You’ve been notified of fraud in Illinois litigation. Now what?

Most collection matters that reach the litigation stage do not encounter issues arising from identity theft. This is due to the sophistication of financial institutions and other organizations which have policies and practices in place to identify and address fraud and identity theft. Oftentimes an account is flagged for fraud or theft by a company before the consumer even knows there is a problem. As a result, files are typically very well vetted before they get to the litigation stage. 

If allegations of fraud are raised, your organization should start an internal investigation as soon as it is notified of the fraud. Illinois law allows a creditor time to respond to identity theft allegations, but it is important not to delay in investigating the allegations and to use all time available to you. Start with a broad search of the account.  As more information is gathered about the potential fraud, the review becomes more narrowed and tailored to the specific allegations being made. Throughout the process, make sure to consult with legal counsel and keep an open line of communication. Counsel will be able to work with the opposing party to gather information from the consumer and request the consumer file a police report and submit all the necessary affidavits under Illinois Supreme Court Rule 280.5.

What does Illinois Supreme Court Rule 280.5 require?

Illinois Supreme Court Rule 280 was enacted in 2018. Rule 280 has several different subparts, including 280.5, which deals with fraud and identity theft. Rule 280 applies to collection actions based upon credit card debt or brought by a debt buyer. A debt buyer is an entity or person who purchases a debt after the debt is delinquent or charged off. If an entity purchases a debt while the debt is in good standing, the entity does not qualify as a debt buyer.

The purpose of the broader rule 280 is to provide clarity to defendants regarding the entity bringing suit and provide information as to how the claimed damages were calculated. Rule 280 made pleadings more uniform by requiring credit card creditors and debt buyers to complete a standardized affidavit when bringing their claim. The standardization implemented by rule 280 provides consistency for the consumer in appearance and content.

As previously mentioned, the last section of the sub-section of rule 280, found at 280.5, provides a clear method for defendants to assert identity theft in credit card and debt buyer litigation. According to Illinois Supreme Court Rule 280.5, to assert identity theft in litigation, a defendant must complete two different affidavits. 

The first affidavit required by rule 280.5 is an identity theft affidavit on a form approved by the Illinois Supreme Court. The Illinois Supreme Court affidavit only requires basic information with minimal factual allegations.  This affidavit is easy to complete for the consumer, but does not provide the creditor with much information regarding the fraud allegations.  This affidavit is filed in the public record and serves as a way to put the court and the plaintiff on notice of the alleged fraud.

The Illinois Supreme Court Rule 280.5 affidavit can be found here.

The second affidavit required is an identity theft affidavit on a form approved by the Illinois Attorney General. The Attorney General affidavit requires the defendant to provide specific identifying information and in-depth details about the alleged fraud or theft. This affidavit will be a wealth of information that will direct and narrow the creditor’s investigation. Due to the amount of information contained in the attorney general affidavit, it is not filed in the public record.

The Illinois Attorney General Rule 280.5 affidavit can be found here.

Both the attorney general affidavit and the Illinois Supreme Court affidavit are required to be sent to the creditor. Once both affidavits are served on the creditor, the creditor has 90 days to either dismiss the case or to file a counter affidavit that outlines why the creditor believes the debt is valid.

Does Supreme Court Rule 280.5 require a police report to be filed in conjunction with these two affidavits?

While the form affidavit asks whether a police report has been filed and whether a defendant is willing to cooperate with the authorities, filing a police report is not a requirement of rule 280.5. It is always a best practice for the creditor to ask the debtor to file a police report when fraud or identity theft has been alleged.

What happens after the defendant serves both affidavits to the creditor?

After both affidavits are served on the creditor, the next step is for the creditor to complete their investigation. Rule 280.5 provides 90 days from the date of service of the affidavits to complete the investigation and respond to the allegations. During this 90-day period, the creditor should work hand-in-hand with their attorney regarding the results of the investigation and the development of an appropriate response. If the fraud is founded, the case should be voluntarily dismissed by the creditor.  If the investigation finds the allegations of fraud are unfounded, the creditor should then file a counter affidavit. Failure to file a counter affidavit risks dismissal with prejudice by the court. On its own motion, the court can dismiss the case if no counter affidavit has been filed.

What if the creditor determines that the account is not fraudulent? 

The manner in which a case proceeds will depend on whether the case is a small claim (i.e. under $10,000). In the case of a small claim, there is no discovery allowed under the Illinois rules. In these cases, we would determine if the defendant has any interest in settlement or simply set the case for trial. 

A creditor should prepare to come in-person to trial with all of the support, information, and documentation uncovered during the fraud investigation. Be prepared to be able to discuss your investigation and how you concluded that the account was valid.

If the claim is larger than $10,000, the lawsuit will proceed through the discovery process. In discovery, the creditor will want to turn over all the documents that support the finding that the account was valid. Once the discovery process is complete, the case will be then set for trial. Again, a creditor should be prepared to appear and testify as to the validity of the account. 

What if the defendant is right? 

Don't panic! A court will not penalize a creditor for what it did not, or could not, have known at the time it filed its claim, in good faith.  Should a claim be deemed invalid, the best practice is to simply dismiss the claim voluntarily and unwind any negative impacts to the defendant.  For more information, watch the webinar!

If you have any additional questions regarding this topic, feel free to contact Casey and/or Laura at any time.

These blogs are not a solicitation for business and are not intended to constitute legal advice on specific matters, create an attorney-client relationship, or be legally binding in any way.

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