SOL & Case Law

[PhxGuy520]

What is the name of your state? Arizona

I need help in finding case law about the SOL on open accounts. My fiance is being sued for a few credit card accounts that are anywhere from 3-5 years since she last made any payments. According to the charts I find the SOL on open accounts are 3 years in Arizona. Now I am hearing that Arizona sometimes considers credit card account as written contracts that last 5 or 6 years. Any have any background on this? Suggestions on where I could find case law I think might be helpful for the court date.

Thanks in Advance!

 

[xavier2000]

What is the name of your state? Arizona

I need help in finding case law about the SOL on open accounts. My fiance is being sued for a few credit card accounts that are anywhere from 3-5 years since she last made any payments. According to the charts I find the SOL on open accounts are 3 years in Arizona. Now I am hearing that Arizona sometimes considers credit card account as written contracts that last 5 or 6 years. Any have any background on this? Suggestions on where I could find case law I think might be helpful for the court date.

Thanks in Advance!

Does not matter what Arizona thinks, they are wrong. Credit cards are clearly open accounts. If they sue, file a counterclaim for FDCPA violation or some ****...even if it does not stick....then have it removed to federal court as then there is a federal question at hand, then the feds will correctly apply as it being an open account and toss them on their ass.

 

[Debt Guy]

I know this is not the news you want -- I disagree with xavier and I'll explain why later.

I challenge xavier to find me one federal court case that supports his/her position. There are not any that I know of -- I wish there were but I have not been able to find one.

You may or may not be able to move the case to federal court. However, I would not waste my energy on this unless someone can show you a published opinion from a federal court -- that is the only thing that is going to be helpful.

The real answer lies in the wording in state law. I do not have any citations for you. I am told that AZ judges are taking the view that credit cards are written agreements. The same is true for FL, OK, MO and IL (or at least I am told by individuals in those states who have been down that path). I only know of one state (VA) that is taking the opposite view -- there may be others. In every case (pro and con) the answer lies in the wording of the state law.

I would like to be wrong on this -- but I don't think that I am. Here is my standard answer to this question:

The Truth in Lending Act seems to be the common catalyst for people’s belief that a credit card is an open account. The TILA does not mention "open accounts", and its applicability to such would to me be very questionable. What it does refer to is "open end" credit. An "open end" and an "open account" are not the same. Unfortunately, because of similar names and the word "open" being included in both, most people assume they mean the same thing; they don't. While credit cards are "open end" accounts, they are rarely considered "open accounts." However, some charge cards can be considered open accounts, but a "charge" card is different than a "credit" card.

There is little law on this subject and it is not entirely clear which statute of limitations should apply to a credit card debt. In situations in which the financing is provided by the merchant, then the “open account” statute of limitations should apply because the transaction is one for the sale of goods and the financing aspect is merely a portion of that arrangement. However, if a third party provides the financing, then the suit is one based on the written contract to provide credit.

More and more it seems that judges in a number of states are persuaded by the argument that a bank credit card is not the same as a store charge card. As a result, judges seem to be taking the view that credit cards are written agreements.

Good luck to you -- let me know what you find out.

 

[Leinalani]

I know this is not the news you want -- I disagree with xavier and I'll explain why later.

I challenge xavier to find me one federal court case that supports his/her position. There are not any that I know of -- I wish there were but I have not been able to find one.

You may or may not be able to move the case to federal court. However, I would not waste my energy on this unless someone can show you a published opinion from a federal court -- that is the only thing that is going to be helpful.

The real answer lies in the wording in state law. I do not have any citations for you. I am told that AZ judges are taking the view that credit cards are written agreements. The same is true for FL, OK, MO and IL (or at least I am told by individuals in those states who have been down that path). I only know of one state (VA) that is taking the opposite view -- there may be others. In every case (pro and con) the answer lies in the wording of the state law.

I would like to be wrong on this -- but I don't think that I am. Here is my standard answer to this question:

The Truth in Lending Act seems to be the common catalyst for people’s belief that a credit card is an open account. The TILA does not mention "open accounts", and its applicability to such would to me be very questionable. What it does refer to is "open end" credit. An "open end" and an "open account" are not the same. Unfortunately, because of similar names and the word "open" being included in both, most people assume they mean the same thing; they don't. While credit cards are "open end" accounts, they are rarely considered "open accounts." However, some charge cards can be considered open accounts, but a "charge" card is different than a "credit" card.

There is little law on this subject and it is not entirely clear which statute of limitations should apply to a credit card debt. In situations in which the financing is provided by the merchant, then the “open account” statute of limitations should apply because the transaction is one for the sale of goods and the financing aspect is merely a portion of that arrangement. However, if a third party provides the financing, then the suit is one based on the written contract to provide credit.

More and more it seems that judges in a number of states are persuaded by the argument that a bank credit card is not the same as a store charge card. As a result, judges seem to be taking the view that credit cards are written agreements.

Good luck to you -- let me know what you find out.

how complicated - yet understandable....

 

[PhxGuy520]

I know this is not the news you want -- I disagree with xavier and I'll explain why later.

I challenge xavier to find me one federal court case that supports his/her position. There are not any that I know of -- I wish there were but I have not been able to find one.

You may or may not be able to move the case to federal court. However, I would not waste my energy on this unless someone can show you a published opinion from a federal court -- that is the only thing that is going to be helpful.

The real answer lies in the wording in state law. I do not have any citations for you. I am told that AZ judges are taking the view that credit cards are written agreements. The same is true for FL, OK, MO and IL (or at least I am told by individuals in those states who have been down that path). I only know of one state (VA) that is taking the opposite view -- there may be others. In every case (pro and con) the answer lies in the wording of the state law.

I would like to be wrong on this -- but I don't think that I am. Here is my standard answer to this question:

The Truth in Lending Act seems to be the common catalyst for people’s belief that a credit card is an open account. The TILA does not mention "open accounts", and its applicability to such would to me be very questionable. What it does refer to is "open end" credit. An "open end" and an "open account" are not the same. Unfortunately, because of similar names and the word "open" being included in both, most people assume they mean the same thing; they don't. While credit cards are "open end" accounts, they are rarely considered "open accounts." However, some charge cards can be considered open accounts, but a "charge" card is different than a "credit" card.

There is little law on this subject and it is not entirely clear which statute of limitations should apply to a credit card debt. In situations in which the financing is provided by the merchant, then the “open account” statute of limitations should apply because the transaction is one for the sale of goods and the financing aspect is merely a portion of that arrangement. However, if a third party provides the financing, then the suit is one based on the written contract to provide credit.

More and more it seems that judges in a number of states are persuaded by the argument that a bank credit card is not the same as a store charge card. As a result, judges seem to be taking the view that credit cards are written agreements.

Good luck to you -- let me know what you find out.

Thanks for the great explanation. I have a couple more questions for you if you don’t mind.

Doesn’t a written contract by definition have a start and an end date?

(I think you answered this above, but will still ask) Is there any legal place that has the definition of an open account and one of a written contract?

Really the SOL is the only defense she has. If the judge does rule against her do the judges usually give the law firm the entire amount. Some of the suits are for $800 charge offs that they are now asking for 3000 dollars (interest and legal fees)? Do judges take into consideration that this company probably paid pennies on the dollar for the account? Is there any point in her going through the embarrassment of showing up?

 

[Leinalani]

Thanks for the great explanation. I have a couple more questions for you if you don’t mind.

Doesn’t a written contract by definition have a start and an end date?

(I think you answered this above, but will still ask) Is there any legal place that has the definition of an open account and one of a written contract?

Really the SOL is the only defense she has. If the judge does rule against her do the judges usually give the law firm the entire amount. Some of the suits are for $800 charge offs that they are now asking for 3000 dollars (interest and legal fees)? Do judges take into consideration that this company probably paid pennies on the dollar for the account? Is there any point in her going through the embarrassment of showing up?

Ususally, from what i've seen, Judges will award the Collection Agency what they're asking for. They don't depreciate the value or take into consideration what they may/may not have purchased the debt at.

It looks better in your wife's interest to show up at the hearing. Then, during the hearing, your wife can ask, in anticipation of a judgement against her, ask for a payment schedule from the Judge. But ask BEFORE the Judge makes a ruling. That may be your only way of paying off the judgement on a sensible time table instead of being stuck with a judgement that the collection agency will probably want IN FULL. And, if you can't pay it in full and they DO NOT agree to a payment schedule, they may go after assets and granishments, which can be done in AZ.

It's up to your wife is she wants to go or not.

 

[Leinalani]

Oh, and if your wife doesn't show up, the Judge might rule in favor of the Collection Agency by default. Not a good thing if you wish to fight the debt with SoL.

 

[PhxGuy520]

Oh, and if your wife doesn't show up, the Judge might rule in favor of the Collection Agency by default. Not a good thing if you wish to fight the debt with SoL.

No if she plans to use the SOL defense she would have to show up. I am just finding less and less likely that it will hold any water, and if they are just going to give the collection agency what they want what’s the point of missing work.

It’s strange that they put statue of limitations accounts, but then don’t put definitions of what each type is?

 

[Debt Guy]

Q. Doesn’t a written contract by definition have a start and an end date?

A. No. A revolving agreement can still be a written contract. That is what this whole debate is about.

Q. (I think you answered this above, but will still ask) Is there any legal place that has the definition of an open account and one of a written contract?

A. You must look to the laws of your state. There is no "universal" definition.

Q. Some of the suits are for $800 charge offs that they are now asking for 3000 dollars (interest and legal fees)?

A. The most powerful force in the universe is compound interest -- especially compounding at a default rate for a couple of years.

Q. Do judges take into consideration that this company probably paid pennies on the dollar for the account?

A. No. Is there a reason you think they should? Risk and reward is a yin-yang thing. The higher the risk; the higher the reward. Right?

Q. Is there any point in her going through the embarrassment of showing up?

A. It would be better and cheaper to fix this before judgment. You have the right to file a general denial and you can then try to convince the judge to allow you to conduct discovery. You might eventually convince the other side to surrender because you are making it so expensive for them. To do that, you got to put in a lot of time and effort learning how to be your own attorney and file all the motions and responses just like a real lawyer(actually, your wife must do this -- you cannot represent her unless you have a law license). Bankruptdy is also an option.

By the way, AZ is a community property state. If these debts were incurred during the marriage, both spouses are legally responsible.

 

[Leinalani]

No if she plans to use the SOL defense she would have to show up. I am just finding less and less likely that it will hold any water, and if they are just going to give the collection agency what they want what’s the point of missing work.

It’s strange that they put statue of limitations accounts, but then don’t put definitions of what each type is?

Ever heard the saying "Interpretation of the Law"...yeah, that baiscally relates to what's happening to you. Sorry to say that. It's really up to the judge to hear both sides and decide what stance to take. He/she could say, "Yeah, you're right, I rule in the Defense's favor that the debt is time-barred!" or, he could rule that the debt is within statute. Dunno how the Judge will rule, but i'd say to try and see what happens....

Oh, and what Debt Guy said might be an option....

 

[PhxGuy520]

Ever heard the saying "Interpretation of the Law"...yeah, that baiscally relates to what's happening to you. Sorry to say that. It's really up to the judge to hear both sides and decide what stance to take. He/she could say, "Yeah, you're right, I rule in the Defense's favor that the debt is time-barred!" or, he could rule that the debt is within statute. Dunno how the Judge will rule, but i'd say to try and see what happens....

Oh, and what Debt Guy said might be an option....

Yeah I hear ya, but I guess it strange that there does not even appear to be any law to interpret. The law may not say "A Credit card is a type of open account", but I would figure it would give the state/federal definition of an “open account” as well as a “written agreement” (probably just not looking in the right place). You would figure if the FDCPA is going to put SOL in place they would also give some sort of definition as to what each one is. For instance I have read a written account is an account in which there is a sum of money that is loaned for x of time, thus having an end date. That is why I am curious judges can lump credit cards into that. I would assume the obvious defense would be "when was the contractual end date"?

 

[PhxGuy520]

Q. Doesn’t a written contract by definition have a start and an end date?

A. No. A revolving agreement can still be a written contract. That is what this whole debate is about.

Q. (I think you answered this above, but will still ask) Is there any legal place that has the definition of an open account and one of a written contract?

A. You must look to the laws of your state. There is no "universal" definition.

Q. Some of the suits are for $800 charge offs that they are now asking for 3000 dollars (interest and legal fees)?

A. The most powerful force in the universe is compound interest -- especially compounding at a default rate for a couple of years.

Q. Do judges take into consideration that this company probably paid pennies on the dollar for the account?

A. No. Is there a reason you think they should? Risk and reward is a yin-yang thing. The higher the risk; the higher the reward. Right?

Q. Is there any point in her going through the embarrassment of showing up?

A. It would be better and cheaper to fix this before judgment. You have the right to file a general denial and you can then try to convince the judge to allow you to conduct discovery. You might eventually convince the other side to surrender because you are making it so expensive for them. To do that, you got to put in a lot of time and effort learning how to be your own attorney and file all the motions and responses just like a real lawyer(actually, your wife must do this -- you cannot represent her unless you have a law license). Bankruptdy is also an option.

By the way, AZ is a community property state. If these debts were incurred during the marriage, both spouses are legally responsible.

Actually we are not married yet. We do share bank accounts and have lived together for sometime. (However I don’t believe AZ has common law marriage)

Ok I searched multiple sites for Arizona debt collection laws. I can find nothing that even mentions the word "open account". Again I know I won’t find something in the written law that says "credit cards are open accounts", but shouldn’t I be able to find what the state definition of "open account" and "written agreement".

Do you think the collections agency would consider settling this outside court even though the summons has already been created? I figured that have already incurred all the cost they are going to incur and would have no reason to settle this.

Thanks to everyone for responding. I appreciate your time!

 

[Leinalani]

If you're considering using the SoL as a viable defense to their claim, you might not want to offer any kind of pay off to the collection agency. If you do, you are validating the claim and by paying money, restarting the SoL.

But, if you just want to get rid of the debt, you could try working it out with them. Most of the time they will ask for a lump sum. If you can come up with it, pay it off. If not, they will still come after you and will now do it with a vengence since they now think you have money since you offered them a payment option.

But this is your future wife's debt, talk to her about the options you've been given then have her deal with it. It shouldn't be your responsibility to come up with her defense to a summons or to deal with her debt in any way whatsoever. Then reconsider having any joint accounts and separating potential marital property.

 

[TigerD]

You would figure if the FDCPA is going to put SOL in place they would also give some sort of definition as to what each one is.

The FDCPA has nothing to do with SOL. Every state decides for themselves.


DC

 

[Debt Guy]

Q. You would figure if the FDCPA is going to put SOL in place they would also give some sort of definition as to what each one is.

A. The FDCPA has nothing to do with SOL. Where on earth did you get that idea?

Q. For instance I have read a written account is an account in which there is a sum of money that is loaned for x of time, thus having an end date.

A. What you just defined is a "closed-end" account. Credit cards are "open-end" accounts. Either type can be a written agreement. Go back read what I said about the difference between "open account" and "open-end" accounts. They are not the same. I know it is confusing, but unfortunately that is the way it is.

Q. That is why I am curious judges can lump credit cards into that.

A. Again, you are mixing apples and oranges here. If I write out an agreement and you sign it -- we have a written agreement. Right? Now assume the terms of that written agreement say that you have a total credit line of $500 and that you can draw it all at once or you can draw it in small blocks at your convenience. Assume that the agreement sets up a monthly payment schedule of accrued interest plus $5. Further assume that the agreement says that if you repay part of the principle, you can "re-borrow" that amount later. Does this all make sense so far? We have a written agreement that governs this revolving open-end relationship. That is a credit card.

Q. I would assume the obvious defense would be "when was the contractual end date"?

A. Try it. It won't work. Only "closed-end" accounts have end dates. A car loan is an example of a closed-end account.

Q. Ok I searched multiple sites for Arizona debt collection laws. I can find nothing that even mentions the word "open account".

A. You may not be looking in the right place. Or this may be the exact problem with AZ law. Have you actually considered hiring a local lawyer -- you know, someone who might actually know what the law is. Asking strangers on the internet is certainly cheap -- but you get what you pay for. Understand what I mean?

Q. Again I know I won’t find something in the written law that says "credit cards are open accounts", but shouldn’t I be able to find what the state definition of "open account" and "written agreement".

A. Maybe. Maybe not. That is what happens when you have 50 legislatures each doing their own thing. Besides, if it was easy, then you would not need to hire lawyers to tell you what it all means. The legislature is comprised of 95% what -- sheep herders? chefs? tight-rope walkers? lawyers? Why would they want it to be easy?

Q. Do you think the collections agency would consider settling this outside court even though the summons has already been created? I figured that have already incurred all the cost they are going to incur and would have no reason to settle this.

A. Sure, they will settle. It will just cost more than it would have cost 6 months ago. Right now, all the leverage is on their side.

I ask again. Is bankruptcy an option? That is your most powerful bargaining tool right now.