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Fine Print Explained: Car Sale Contracts, Part 2 – Alabama Consumer Rights Attorney Judson E. Crump

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Deciphering Car Sale Contracts, Continued.

If you haven’t read the first part of this article, you should read it here.

Today we look at all that fine print on the back side of your car sale contract, and figure out what it all means.

 

XI.  Finance Charge and Payments.  Ripoff Rating: 1/10.  You promise to make your payments, they charge late fees, they credit your payments to interest first and then principal.  What you’d expect.  No big deal.

 

XII.  Misc. Promises by You.  Ripoff Rating: 2/10.  You still have to pay if you crash, lose, or damage the car.  You promise not to deliberately abuse the car.  You promise not to drive it outside the US or Canada or sell or lease it to someone else.  They get a lien on the vehicle and you have to keep it insured against damage – beyond your normal liability insurance.  2 Ripoff points for not letting you drive to Tijuana.

XIII.  Default Remedies.  Ripoff Rating: 6/10.  If you miss a payment or let your insurance lapse, then they can do lots of bad things to you.  They can take the car, they can sue you and demand attorneys’ fees as well, they will charge you storage fees for the stuff that was in the car when they repo’d it.  They will charge you late fees, they will cancel your service contracts and keep the refund.  What is not in here?  A grace period.  So if your payment is one day late, they can take the car, dump it at auction for a way-too-low price, and sue you for the balance plus court costs and lawyer fees.


XIV.  Warranty Disclaimer.  Ripoff Rating: 8/10.  They do not stand behind their product.  In the old days, it was assumed that if a product broke down or didn’t do what it was supposed to do, you could take it back for a refund or replacement.  In fact, that’s just what happens if you buy a coffeemaker from Wal-Mart that is malfunctional.  But car dealers don’t offer Wal-Mart’s level of customer service.

If the wheels fall off when you drive off the lot, you can’t do anything about it.  Even if they swore to you that it was a 1-ton diesel capable of hauling a 36′ Contender to Miami and back.  You’re stuck with the lemon.  And the lemon law does not apply to used cars.  This does not affect manufacturer’s warranties.

XV.  Window Sticker Rule.  Ripoff Rating: 0/10.  The Federal Trade Commission requires all used cars to have a window sticker showing basic info about the vehicle and any warranties that go along with it.  The law also requires that sticker’s terms to be part of the contract.  Trust me, if it wasn’t required by Big Government Regulation, dealers wouldn’t do it, because that regulation is designed to help you, the buyer, not get screwed.

 

XVI.  Robocall Consent.  Ripoff Rating: 3/10.  They can call you with robotic telephones to annoy you when they want some money.

XVII.  Choice of Law Provision.  Ripoff Rating: 0/10.  Alabama law applies to contracts written in Alabama.  Common sense.

XVIII.  Holder Rule Notice.  Ripoff Rating: 0/10.  When the contract is sold to a finance company, you can sue that finance company for any fraud or breach of contract that the dealer committed.  This is to defeat the old common law “holder in due course” doctrine, which was a legal loophole by which a scammer could deceive someone into signing a contract for money payments, then assign that contract and flee to Mexico.  The finance company could then pretend to not know about the fraud and sue you for the payments on a fraudulently obtained contract.  Today, you can’t do that because dealers have to include the Holder Rule Notice in these contracts.  Like most other clauses that provide the buyer with some rights, this one is only in the contract because it is required by a Big Government federal regulation.

XIV.  Arbitration Clause.  Ripoff Rating: 10/10.  This says that if they deceive you, sell a dangerous product, overcharge you, and steal your money, you can’t take them to court.  Instead, you have to go through a private, pseudo-legal proceeding called Arbitration.  Your case will be decided by a random corporate lawyer.  There is a 90% chance the arbitrator will be an older white male who has spent the past 20 years defending corporations like the one that ripped you off.  The rules of evidence don’t apply.  You can’t compel them to produce documents or evidence that they don’t want to produce.  You can’t make them sit down and tell you their side of the story.  No jury.  No judge.  No appeal if the arbitrator sleeps through the proceeding and then issues a ruling against you that is utterly baseless in the law and ignores all of the evidence.  You can’t join up with other people who’ve been similarly ripped off and file a joint lawsuit, or any sort of class action.  In other words, no matter how bad or deceitful the dealer’s conduct, and no matter how much you were harmed, your legal remedies are cut in half, if that.

Forced Arbitration: The King of Bad Deals.

It’s unavoidable nowadays, because the U.S. Supreme Court (even “liberal” justices like Breyer) are mostly former corporate lawyers who’ve never represented an ordinary working person in their entire lives, and they live in a bubble that protects them from having any clue about what life is like for the 99% of us who live in the modern American economy.  But that’s life.  At least for now.  Maybe Trump will lose in 2020 and we’ll have a good president who will get to appoint 3 justices who care about working folks.

As bad as some of these terms are for consumers like you and me, I hope this at least illuminates the nature of these contracts.  The more you know, the more you can protect yourself.

 

Fine Print Explained: Car Sale Contracts – Alabama Consumer Rights Attorney Judson E. Crump

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Ever wonder what all that fine print in your car purchase contract means?  Here’s a basic explanation.  Warning: when you are done reading this, you will learn that you have been screwed before.

If you’re like most people, when you want to buy something or enter into some sort of deal, you get presented with some massive, multiple page form contract filled with fine print and unintelligible words and phrases.  Fine print contracts of adhesion are everywhere.  We’re used to them. If you don’t live on a farm in the woods with no sort of insurance or communication services and get around on horseback, then you’re stuck with hundreds of them every year.  And since they’re not only mandatory but also basically indecipherable, you probably don’t bother reading them.

But in case you’re curious just what exactly you’re agreeing to, here it is:

I.  The Basic Sale Language.  Ripoff Rating: 0/10. – This identifies the parties and the goods being sold.  Real simple, and very necessary.

The beginning of a typical sale contract.

 

II.  The TILA Box.  Ripoff Rating: 0/10.  The Truth in Lending Act requires the seller to not only state the price of the goods, but also the cost of any credit charges associated with the transaction.  They also must itemize every charge that was financed.  This is also very necessary, because without it you wouldn’t know what you were paying and why.

The Truth in Lending Act Box. This is where finance charges, fees, and dealer add-ons are listed. Read it carefully.

 

ALWAYS examine this box thoroughly, because most of the charges here are entirely optional.  This is where they have to list any doc fees, credit life or disability insurance premiums, GAP insurance premiums, service contracts, extended warranties, etc. There are two important things to know about these charges:

  1. You cannot be required to purchase these things.  If you see them on your contract and you don’t want to waste thousands of dollars that you don’t have to spend, you can and should ask the dealer to rewrite the contract to remove everything but doc fees and Tag/Title fees, which are $16.50 in Alabama.
  2. You are being overcharged for these things.  Dealers add hundreds of dollars to the prices of these extras and pocket the money.  For instance, if a GM extended warranty costs $1,000, the dealer won’t tell you that, but will just write it up with a cost of $1,500.  The dealer gets to keep the difference, while you’re paying that money back with interest.  This used to be considered fraud, but our super-conservative AL supreme court decided in the 1990s to let dealers off the hook.  It remains a huge profit source for them.

That concludes the part of your contract that is actually useful and necessary.  Everything else is utterly worthless to you as a buyer, and is designed solely to give the dealer more money and privileges while depriving you of as many rights as the law allows.  This isn’t hyperbole.  It’s life in the modern American economy in a conservative state.

III.  GAP Contract Box.  Ripoff Rating: 3/10.  This is where you can agree to pay extra money to the dealer for a virtually worthless service.  I don’t care what the salesman tells you.  It’s a ripoff.

Sign if you want to donate money to your car dealer and get almost nothing in return.

IV.  No Cooling Off Period.  Ripoff Rating: 3/10.  Pretty Self-Explanatory.  Once the deal is signed, you can’t bring it back, even if the salesman promises otherwise.

No Cooling Off Period. You can’t bring the car back and cancel the deal, even 5 seconds after you sign the paperwork.

 

V.  Interest Rate Skimming Notice.  Ripoff Rating – 7/10.  This short little disclaimer warns you that the interest rate on your contract is probably higher than the interest rate that the finance company was going to charge you.  How does this work?  Easy.  You fill out a credit application at the dealership.  They send it to multiple finance companes to “find you the best deal.”  They get a few responses almost instantly, based on your credit, income, and other information.  Bank A says they’ll finance the deal at a minimum of 8% APR, with a monthly payment not to exceed $300.  Bank B says they’ll finance the deal at a minimum 8.5% APR, with a monthly payment not to exceed $350.  The dealer says, “You’ve got some problems on your credit, but we worked hard and pulled a few strings and got you approved at $325/month with Bank B.  That’s a good deal, buddy.”  Not knowing any better, you agree, and they fill out a contract with an interest rate of 12.75%.  They didn’t tell you that Bank A would have financed the deal at 8% with a monthly payment of $287.  And this little 2-liner lets them off the hook if you later discover that they were lying to you.

The Interest Rate Overcharge Notice. If the dealer can convince you to pay more interest rate than the finance company requires, then they get to keep the bonus money.

VI.  Merger Clause.  Ripoff Rating: 7/10.  This says that the paperwork is the entire deal.  Sounds innocuous, right?  But what it means in the courts is that nothing anyone told you matters at all once you sign this contract.  So the salesman could promise 38 mpg mileage, that the car has 266 HP, that it’s never been wrecked, that you can bring it back tomorrow if you don’t like it, that the financing you got was the best they could find, or basically anything else, and even if he is lying through his teeth, you can’t do anything about it.

This says that the salesman can deliberately deceive you and you can’t do anything about it. Also, if you are 3 days late on a payment and the finance company says they won’t repo it if you wire them the money today, they can still repo it.

It also is designed to get finance companies off the hook if they promise to let you make a payment 2 days late, accept the payment, and then repo the car anyway.

VIII.  Read-This-Contract Notice.  Ripoff rating: 4/10.  This is legally mandated warning that you should read this contract before you sign it.  By signing it, you are basically saying that you read the whole thing and understood it, even though that’s obviously false for 90% of the American public.  You’ll be held to this if you ever make it to court.  It also incorporates any arbitration agreement that may be attached to this deal.  Which accounts for its ripoff rating.

You read this front and back, right?

IX.  Optional Insurance Box.  Ripoff Rating: 4/10.  If you were conned into buying some credit life or disability insurance, this is where you sign to agree to it.  Please don’t sign it.  If you’re just feeling generous, give your money to a charity instead.  Or go out to eat and leave a good tip.

Another optional donation to your car dealer.

X.  Assignment Block.  Ripoff Rating: 0/10.  This is where they write the name of whatever finance company they sell the contract to.  No big deal.  It doesn’t change the terms of the deal in any way.

They can sell your contract to a finance company. No big deal.

 

That concludes our analysis of the first page of a typical retail installment purchase agreement for a motor vehicle in Alabama.  Next, we’ll talk about the back of the contract.

 

Alabama Legislature Proposes to Help Credit Card Companies Sue their Customers – Alabama Debtor’s Rights Attorney Judson E. Crump

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The Credit Industry Lobby has Succeeded in Convincing the Alabama Legislature to Make it Easier to Sue Customers.

Once again, a big business lobby has convinced some of the fools in Montgomery to propose a bill that would help the huge-money finance industry at the expense of ordinary working people.  It’s a move that is pretty typical for Alabama’s Hyper-Conservative legislature, the majority of which is always ready to do the bidding of industry lobbyists.

The bill, which doesn’t yet have a name, would give credit card companies six years to sue its customers, regardless of which legal theory they are suing under.

Alabama’s current law on credit card statutes of limitations is surprisingly complex, because the statutes were written way before credit cards had been invented.  Suffice it to say that some credit card cases can be brought within 6 years after the date of default, but others must be brought within three years.

The three year statute that applies to credit card lawsuits brought under the “open account” legal theory has helped thousands of Alabamians save hundreds of thousands of dollars from wage garnishments and adverse credit reporting. Is this a good thing?

Well, sure, sometimes this allows people to get away from paying debts, but despite what the credit industry would have you think, very very few collection lawsuits are filed against deadbeats.  Most people want to pay their bills and try very hard to do so.  But sometimes they just can’t.  Maybe because they’ve been laid off, or their wife got cancer, or they got a nasty divorce that took all their assets.  So escaping a wage garnishment or judgment is often the thing that saves people from being forced into bankruptcy.

So shame on State Rep. Marcel Black for proposing this law.  One can only wonder what “favors” he received from the finance industry for betraying the citizens of this state.

And also, what’s wrong with requiring banks to sue within 3 years?  That’s plenty of time to gather your evidence and hire a lawyer to file a lawsuit.  Whenever I represent a human against a debt collector reporting false information or a car dealer who’s defrauded them, I’m stuck with a one-year or two-year statute of limitations.  Do I complain?  No.  I just do my job and act with diligence.

There’s nothing unfair about requiring them to act almost as responsibly as I do when I sue them.

One final thought that you need to remember.  Every time the credit industry pays Congress or a state legislature to pass a bill helping them at the expense of consumers, they justify it with the same argument: if you don’t pass this bill, it will increase the cost of credit and make credit less available to those who need it most.  This is total bullshit.  The data shows that deregulation of the banks doesn’t actually help consumers.  It just increases profits.  The only “credit” that is affected by most regulations is on the sketchy end of the legitimate<—->predatory spectrum.  So next time you hear your lawmakers debating a handout to the finance industry, don’t think for a moment that you’ll benefit.  Because you won’t.

What is the Statute of Limitations on a Credit Card Lawsuit in Alabama? — Alabama Consumer Credit Lawyer Judson E. Crump

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If you’ve defaulted on a credit card, how long can the bank wait to sue you?

Believe it or not, this is a surprisingly complex question.  In most lawsuits, the statute of limitations is simple.  Car wreck cases have to be filed within two years.  Ala. Code Sec. 6-2-38(l).  So do fraud cases.  Ala. Code Sec. 6-2-3  Truth in Lending Act cases have to be filed within one year.  15 U.S.C. Sec. 1640(e).

But credit card cases aren’t so clear.  The reason is that credit cards weren’t invented when Alabama’s statutes of limitations were written, so the laws don’t clearly apply.  Is it a contract case?  An open account?  An account stated?  The answer is that it depends on what evidence the credit card company has against the consumer.

In Alabama there are three legal theories that could apply to a credit card lawsuit.  A contract case is the one that would seem to fit best.  If you have entered a written credit card agreement, then a lawsuit to enforce that agreement should be a contract case, right?  Yes.  But sometimes, the credit card companies can’t produce the original contract, and without it, the rules of evidence don’t allow extraneous evidence of the terms of the contract.  So that makes a contract case impossible to win.  A contract case has a statute of limitations of six years.

So if they can’t produce any agreement, they can try to sue for what’s called an “Account Stated.”

“An account stated is a post-transaction agreement. It is not founded on the original liability, but is a new agreement between parties to an original account that the statement of the account with the balance struck is correct and that the debtor will pay that amount. It is as if a promissory note had been given for the balance due.”  Ayers v. Cavalry SPV I, LLC., 846 So.2d 474 (Ala. Civ. App. 2003).

Basically, if you have a longstanding account with a bank, store, or credit card company, and they send you statements that you either agree to explicitly or implicity by, say, sending payments, then the law can construe that as an account stated.  They’ve “stated” a balance due on an “account,” and you haven’t paid it.  But sometimes, the bank or debt collector can’t prove that, either.  They have to produce evidence that written statements were actually sent to you and you assented to them somehow.  If they can’t produce that evidence, they should lose the case.  An Account Stated has a limitations period of six years.

If the Account Stated fails, then they can move down to an “Open Account.”  Which is basically just an account of some sort that exists and hasn’t been paid.  This doesn’t necessarily require a written contract or written statements (though proving a case without statements is difficult, since a credit card company never has a witness who can say, for instance, ‘I saw Jane Doe swipe this card at Target on June 1, 2009.’).

Of the three legal theories, an Open Account is the easiest to prove.  But it has a three year statute of limitations.  This means that credit card companies and debt collectors often are too late to take advantage of the easiest form of action.

Very recently, the Alabama Legislature has proposed a bill to extend the open account action to six years.  This is a bad idea, and would be more generous to credit card companies (and harmful to struggling working folks) than most states.

Virginia College = Scum – Alabama Consumer Rights Attorney Judson E. Crump

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Thinking About Enrolling at Virginia College?
DON’T!

Usually I’m pretty upbeat about my law practice.  I get to represent real people with real world problems.  I don’t have billing hour requirements.  My clients are always very grateful for my work.  I set my own hours and take or turn down whatever cases I want to.  But there is a downside.  Want to know the worst thing about being a consumer rights lawyer in America in 2017?  It’s this:

Seeing people who have been totally screwed and having to tell them there is nothing they can do about it.

That is the worst part of my practice.  And it happens all the time.

-ALL- the time.

At least 5 times a week I get a phone call, an email, a website inquiry, or a personal meeting with a person who is interested in hiring me, who has a legitimate gripe against some person or business who’s taken their money or ruined their credit or intruded into their financial privacy, or something like that.  And they bring me a contract to look over that they’ve signed.  And sure enough, it’s a long, unintelligible, fine-printed mess that Rumplestiltskin would be proud of.  No matter how unfair a contract is, it will almost always be upheld by our courts.  This wasn’t always the case, but we have had an very conservative Supreme Court for the past 30 years now, so the law has changed.

So latest nastily lopsided contract I saw came from a young woman who wanted one thing: a better job.  She had seen some advertisements from a legitimate-looking college called “Virginia College.”  Sure sounds legit, right?  Don’t snicker or chuckle here.  If you’re younger than 20 and don’t come from a family of college grads, you’d be fooled too.  So she wanted to be a pharmacy technician, and Virginia College told her they could get her there.

Needless to say, they didn’t.  Even though she got excellent grades on all her tests.  When she went to find a job, she discovered that the “education” she’d received was basically worthless.

That’s because Virginia College is no more a college than the Salvation Army is an army.  They call their facility a “campus” and they call the manager of that facility a “dean,” but those labels are designed, like everything else at these for-profit “colleges,” to bolster the facade of legitimacy.  Because for-profit colleges don’t exist to actually provide education.  They merely pretend to provide education in order to take advantage of the gigantic government handouts of the federal student loan program.  They’re taking billions of dollars of taxpayer money that is intended to pay for real education, and leaving the debt – which can’t be discharged in the bankruptcies that their students inevitably file when they can’t find a job – on the poor students who fell for their scams.

Now here’s the real kicker: we can tell how bad Virginia College is screwing its “students” without even setting foot on their “campus.”  All we have to do is look at the enrollment agreement you have to sign to get there.  It’s attached, and you can read it for yourself here:

Enrollment Agreement -Virginia College

Here are a few highlights:

Arbitration Clause.  This prohibits you from ever taking them to court if they have defrauded you or failed to provide you with the services you paid for.  It ensures that if you do make a complaint against them, the best you get is a biased hearing and, in the off-chance that they lose, they get to keep it secret, so other people who find themselves in your position don’t get to see your suit against them in any public record.  See Paragraph 10.

Class Action Waiver.  You can’t sue them, or even participate in a class action case against them.  Ever.  This is a get-out-of-jail free card for any corporation that steals, as long as they steal small amounts of money from large numbers of people.  That’s not hyperbole.  AT&T Mobility v. Concepcion (U.S. 2011).  See Paragraph 10.

One Way Attorneys’ Fees.  So if you sue them and you lose, you have to pay their lawyers’ fees.  If they sue you and you lose, you have to pay their attorneys’ fees.  If they sue you and lose, they don’t have to pay your fees.  If you sue them and win, they don’t have to pay your attorneys’ fees.  Paragraph 15.

Liquidated Damages.  So if they defraud you into wasting 2 years of your life in their worthless programs and taking on $25,000 of bankruptcy-proof student loan debt at 6% interest, and you take them to court and prove all that, the most you can get is your tuition.  None of the costs of actually going to school, none of the time you wasted there.  And it gets worse: it goes to your student loan company instead, but doesn’t cancel the debt because it doesn’t pay the interest!  So if you can find a free lawyer and win, you still lose money!  Paragraph 14.

Integration Clause.  Paragraph 16.  This lets their salespeople and “deans” and “professors” lie to your face, and prevents you from doing anything about it if their lies are contradicted by the fine print in this contract, or something in the massive handbook referred to in this contract.  Even if you have them tape-recorded making a demonstrably false statement, you can’t do anything about it.  At least, not in Alabama.

Non-Transferability of Credits Acknowledgement.  Paragraph 8 basically says that “we aren’t a real college, so the credits we award you probably won’t be recognized by any legitimate educational institution.”  This should be a warning sign to you.

It’s almost comical.  Almost.  Because this sort of crap used to be illegal.  In the old days, courts wouldn’t enforce such totally unfair stuff.  But not anymore.  These businesses make a ton of money.  And they don’t earn it by producing a quality product.  They earn it by trickery, and by preying on the dreams of good people.  But since they do make money, they can pay politicians to write laws that shield them from liability for their own misconduct.  They can pay the justices of the Alabama Supreme Court to keep them from ever having to repay people they’ve defrauded.  They can pay for advertising campaigns that distribute propaganda to voters so we’ll think that if we don’t keep the government boot on working people, our economy will collapse and all of our jobs will disappear.  And it works.  It’s working great.  The propaganda has been a massive success.

Alabama Supreme Court Continues to Harm Working People for the Benefit of Wealthy Corporations – Alabama Consumer Rights Advocate Judson E. Crump

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The Alabama Supreme Court Hates Working People and Loves Big Corporations.  Here’s Yet Another Example.

On June 26, 2015, the Alabama Supreme Court issued a decision in the case of American Bankers Insurance Company of Florida v. Gladys Tellis.  Now, for those of us who have been living for a while under the extreme anti-consumer regime of the current Alabama Supreme Court, the outcome of such a case can be predicted just by its name.  American Bankers Insurance Company (a huge and rich insurance company) against a lady named Gladys Tellis (an ordinary woman seeking justice after she’d been defrauded).  Whenever a big company is sued by a worker or consumer or anyone who isn’t also a big powerful corporation, the Alabama Supreme Court, whose 9 Republican Justices were elected with millions of campaign dollars paid for by those very banks and insurance companies, is almost certain to find a way to rule against the working man.  So this case was no exception: they handed down a decision that dealt yet another blow to regular people seeking justice.

In this case, the issue before the Court was whether the insurance company could enforce a mandatory arbitration agreement against the Plaintiffs in that case.  Normally, arbitration agreements are enforced due to a federal law called the Federal Arbitration Act, which since a major US Supreme Court misreading of that statute in 1995, has basically been applied to every contract in the United States.  Note here that though I’m complaining in this article about the extreme pro-corporation bias of the Republican Alabama Supreme Court, in the Allied Bruce Terminix case of 1995, the U.S. Supreme Court’s anti-consumer decision was a 7-2 decision, where the only justices who rightfully dissented were the most conservative members of the Court: Scalia and Thomas -both Republican appointees. So don’t think for a minute that I’m just against Republican judes.  I’m not.  I’m against judges who are biased against workers, the poor, and those who have been done wrong by the rich and the powerful

So enforcing mandatory arbitration agreements, no matter how Rumplestiltskinian they may be, is commonplace in the United States.  Why does this matter?  Because arbitration is a grossly unfair proceeding that deprives people of many, many rights that they are supposed to be guaranteed by the Constitution: the right to join together with other people in lawsuits (not just in class actions, but even cases where a handful of friends have been screwed in the same way by the same company), the right to a trial by jury, the right to obtain evidence in their favor that is held by the other side, and, most importantly, the right to appeal a decision that is flat-out wrong.

But in this case, the Plaintiffs had a solid defense to the arbitration agreement in question: they never signed it.

Now anybody with common sense can understand the issue: if you don’t sign it, it isn’t binding.  That’s the normal rule.  Certainly the opposite rule applies: if you sign a contract, it is binding, right?  And of course, the latter rule has always been enforced by our courts.  And what’s good for the goose is good for the gander, right?

Not in Alabama.

Somehow, the Alabama Supreme Court found a way around the common sense rule that only contracts you actually agree to can be held against you.  They said that by paying premiums, the insurance company’s customers implicitly consented to the arbitration agreement.  This is crazy.  The only explanation, of course, is that these judges were just looking for any excuse to help out their corporate sponsors, and they did so at the expense of all of Alabama’s citizens.

This is what happens when we allow our highest court to be sold to the highest bidder.  It is literally justice for sale.  That is a very evil phenomenon, and the worst part of it is this: our voters don’t care.  Because this is a conservative state, and the millions of dollars of insurance company money floods our televisions, radios, billboards, and emails with false messages that if we don’t elect these extreme Republican justices, then our state will descend into crime and chaos.

Until people start caring about protecting their rights, this is going to continue.  We are going to keep losing, and our citizens are going to continue to be screwed by big out-of-state companies that don’t care about Alabama.

Finally, I’d like to mention one thing that should be remembered.  There was, at that time, at least one ray of hope on the Supreme Court: Chief Justice Roy Moore.  Many people criticize him for his popular image in the media of being a crazy conservative, but the truth is that while he was on the bench, he was the only justice that actually cared about doing justice for ordinary people who had been defrauded or harmed by the rich and the powerful.  In the Tellis case, he wrote a powerful and eloquen dissent explaining just how important the right to trial by jury is, and he saw right through the majority opinion to show just what is happeneing in cases like this: the victims of fraud are excluded from the courthouse.  They have lost their constitutional rights and are forced into an arbitration system that makes a mockery of justice.

Unfortunately, even that ray of hope has been extinguished, as Justice Moore was removed from the bench for his stance in defense of traditional marriage.

The full opinion in the Tellis case can be found here:

American Bankers Insurance v. Tellis

Scalia’s Last Betrayal: AT&T Mobility v. Concepcion – Brokenhearted Catholic Lawyer Judson E. Crump

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January 18, 1995:

JUSTICE THOMAS, with whom JUSTICE SCALIA joins, dissenting.

I disagree with the majority at the threshold of this case, and so I do not reach the question that it decides. In my view, the Federal Arbitration Act (FAA) does not apply in state courts. I respectfully dissent.

Allied Bruce Terminix v. Dobson.

April 28, 2011:

JUSTICE SCALIA delivered the opinion of the Court.

…

We have described this provision as reflecting both a “liberal federal policy favoring arbitration,” Moses H. Cone, supra, at 24, and the “fundamental principle that arbitration is a matter of contract.”

AT&T Mobility v. Concepcion.

One of these statements was made by an honest intellect dedicated to restraining federal power within its original constititutional limits.  The other was made by a dishonest intellect searching for an excuse to rule for the side he liked the best.

Yet both statements were made, or at least agreed to, by the late Justice Antonin Scalia.  What happened during those 16 intervening years?  Did he change his mind?  Did his brain wither and grow feeble?  Was he just tired of fighting the overreach of federal power and decided that, “if you can’t beat ’em, join ’em?”  Did he just have different clerks that ghostwrote his opinions for him?

Any of these things may be possible, but they’re all disturbing.  And the result can’t be denied.  The man who at one time stood constant as a stone for his originalist devotion to the founding fathers’ vision, became somehow more malleable, more willing to compromise his former values, and eventually able to completely reverse course and make a decision that would ultimately do great harm to millions of Americans.

Go ahead and read the actual opinions and you’ll see exactly what I’m talking about.

The Terminix decision is famous because it took the old Federal Arbitration Act (which had largely lain dormant from disuse for many years) and expanded it to say not only that arbitration agreements were enforceable like any other contract (which is what the FAA actually says), but also that it is illegal for any state to enact any law limiting arbitration.  In politics, you often hear people talk about “states’ rights.”  And at one time, Justice Antonin Scalia cared about “states’ rights.”  Case in point: Allied-Bruce Terminix.

Though the SCOTUS wasn’t able to predict it at the time, their Terminix decision created a tidal wave of fine-print arbitration clauses being inserted into every business dealing that the average person enters into in their lives: Want to have internet?  You’re stuck with arbitration.  A car?  Arbitration.  Want to work for a large company?  Arbitration.  Want a bank account?  Arbitration.  Credit card?  Arbitration.

Time would eventually teach us that this explosion of arbitration was really, really bad for ordinary people, because it allowed big businesses to get away with negligence, theft, or even outright fraud and never be taken to court over it.  So the “liberal” justices later decided to change their tune on arbitration.  Once they realized that it was being used to screw over ordinary people, they started ruling against it.  Sure, that’s not intellectually consistent, but liberals justices tend to care a lot less about upsetting precedent.  It’s what they’re all about, in fact.  Judicial activism is the whole problem that most conservatives have with the Supreme Court’s democrat appointees.

But as with so many other things in American civics nowadays, what matters more than principle is what side you’re on.  And so we came, eventually, down to AT&T Mobility v. Concepcion.  In this case, the cell phone carrier falsely advertised free phones, but they were charging people sales taxes on a “free phone.”  Since 5% of $0.00 is $0.00, I don’t understand how that’s possible, but hey, that was what they were doing.  Naturally, they got sued in a class action.

But AT&T had slipped a no-class-action ban into its arbitration contract.  Meaning that if you wanted to sue AT&T for its $5.00 overcharge, you’d have to hire a lawyer and make your own lawsuit.

Obviously, this is never going to happen, which means that enforcing such agreements is basically legalizing frauds that are too small to hire a lawyer for.  4 of the justices realized this and said “No, you can’t do that sort of Rumplestiltskin crap.  This is America.  If you rip 10,000 people off for $5.00 each, you can be taken to court for $50,000.”

But the 5 Republicans said otherwise.  They couch it in much more elegant English and make a few excuses (“class arbitration greatly increases risks to defendants” etc.) but ultimately uphold the fantasy that arbitration is fair, even when it basically leaves consumers with no recourse whatsoever to small wrongdoings.

Of course, much has been written of the unfairness of arbitration elsewhere, so there’s no need to re-write those books here.

My concern here is with Scalia, and particularly how he slowly quit fighting federal power.  How, when faced with cases where the litigants (big businesses) who supported his “team” (the Republican Party) found themselves asking for the expansion of federal power, he lost his principles.  He just gave up.  Unlike his friend, Justice Thomas.

When Scalia died, I heard a lot of mourning, especially from fellow Catholics, about how this justice was a principled, stoic man, a force for good, and a consistent defender of the rights of those fighting federal power.  Maybe with cases involving religion or abortion, he was, even during the last decade of his life.  But not when the power of Uncle Sam was stretched out to protect his favorites.  The record is clear.

Hired Ferry & Nicholas? Consider Getting a Refund – Alabama Debtor’s Rights Lawyer Judson E. Crump

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Ferry & Nicholas Sends Advertisement Letters to Debtors in Alabama.  I believe they may be sending false advertisements.

If you have been sued by a debt collector or credit card company in Alabama, you’ve probably received a letter from a company called Ferry & Nicholas.  They claim to be “professional negotiators” who help people resolve debt collection lawsuits.  I formerly had a client who had hired them for a matter and he informed me that what Ferry & Nicholas did was agree to a consent judgment for the full amount of the lawsuit.  This is obviously a horrible deal that a good attorney could easily have beaten.

I’ve previously written about how Credit Repair Companies and Debt Settlement Companies are Scams, but if you’ve hired this outfit, it is not too late to take action!

Another of my clients recently received a letter from them and I believe that it contains information that is misleading to the public.  I am currently investigating potential false advertisement claims against this company.  If you or someone you know has hired this company, please call me at 251.272.9148 for a free consultation to discuss your options for potentially recovering compansation.

A Letter Ferry & Nicholas Sent to my client.

How to Reverse a Default Judgment, Part III – Alabama Consumer Credit Attorney Judson E. Crump

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How to Get the Court to Undo a Default Judgment for Fraud on the Court.

If you were served with the lawsuit, there is still one other way to get a default judgment vacated: fraud on the Court.  This is not very common, and it is not easy, either.  But just what does it mean to say that a default judgment creditor has committed fraud on the court?

Basically, they lied to the Court in order to get the judgment entered.

Consider the case of Hartigan v. Hartigan, 182 So.2d 725 (Ala. 1961).  A New York resident filed a lawsuit alleging she lived in Alabama and was an Alabama citizen.  She did this to get the Alabama Court to take jurisdiction over her divorce.  Why?  A little history here: back then, Alabama allowed for quicker divorces in most states, so there was a cottage industry here of divorce lawyers who specialized in filing quickie divorces for rich people from out of town.  They’d fly in, sign the papers, do a quick deposition, and their lawyers would do the rest.  They’d have a divorce days or a few weeks later.

Anyway, they tried to modify their divorce 6 years later, and the court realized they were not from Alabama, and so they vacated the judgment for the lies they submitted in their divorce affidavits.  The decision was upheld by the Alabama Supreme Court, and the original divorce judgment was vacated.

The same logic applies to default judgments.  If a default affidavit was filed with the court and contained false information, then that is fraud on the Court and can be grounds to reverse the judgment.

Fraud on the court can come in many forms.  They may have lied about the amount of the debt, or clearly miscalculated it.  They may have lied about the date of the contract or last payment, so as to avoid the statute of limitations.  (Note that unlike ordinary contract cases, most suits involving a repossession deficiency are subject to a 4 year statute of limitations.) They may just have the wrong guy.  Whatever false statement you are complaining about has to be something important.  It can’t just be a minor error like your age.  But if there are demonstrably false statements in their default motion or affidavit, and these statements are material to the case – meaning that the judgment either wouldn’t have been entered at all or would have been a substantially different amount – then you can ask the court to vacate the judgment.

Judges have a lot of discretion on whether or not to uphold default judgments, so your lawyer will have to prepare the case and do some convincing.  But most judges are concerned about avoiding clearly unfair results, and will at least give you a chance.

The key to overturning a default judgment for fraud is carefully reviewing the default motion and all the records in the case.  Your lawyer will need to look for errors that could have provided some defense either to liability or the amount of the debt.

Vacating Default Judgments, Part II – Alabama Debtor’s Rights Attorney Judson E. Crump

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Sometimes, Debt Collectors and Collection Lawyers File False or Bogus Service Returns to Get a Judgment Without Notifying You.  Here’s what to do about that.

Last week, we discussed how to get a default judgment vacated if the Service Return showed that you were not served properly under the Alabama Rules of Civil Procedure.  Now we turn to a more difficult situation: where a collection lawsuit was never served on you, but the Service Return says it was served on you.

Before a plaintiff can ask for a Default Judgment, they must prove two things to the Court: a) that the amount sought in the judgment is valid, and b) that you were notified of the lawsuit in accordance with the Rules.

They prove the amount of the judgment by filing a default affidavit – a sworn statement of someone knowing the facts of the lawsuit attesting to the amount owed.

They prove that you were notified by filing a Service Return, which is signed by whomever served the papers on you and states who, when, and how the lawsuit summons was delivered to you.

Most Service Returns are correct.  The vast majority of them.  But there are numerous cases where the Service Return is just plain false. Sometimes people make mistakes.  They may serve the wrong person, for instance, honestly believing they got the right guy.

But there are also more nefarious reasons why a sheriff’s deputy or process server may put false information on a service return: either they’re lazy and don’t care to identify who they’re serving, or they can’t find the defendant and to save time and satisfy their customers (the collection lawyers) they just sign a service return knowing that they never served the papers.

Unfortunately, where a service return states that you were served it is presumed valid.  And contradicting a false service return is not as simple as just going to the court and telling the judge you never got served.  You must prove that you were never served with corroborating evidence.  Here are a few examples of the sort of evidence you’d need to prove a service return wrong:

  • You were out of town on the date you were supposedly served, and you have plane tickets, hotel reservations, or credit card charges to prove it.
  • The date you were served was a major event in your life that you could be expected to remember well – like a birthday, a wedding, or a funeral of a loved one.
  • The person they claim to have served on your behalf at the time was not living in this state, or was dead or incapacitated.
  • You were in a hospital or incapacitated when they claim you were served.

As you can see, these sorts of things are not often the case.  If you can’t prove the service return wrong, then you are probably stuck with it.  That isn’t fair, I know, but that’s the law.  Now, the judge has wide discretion on this, and if you show up with witnesses and you seem very honest about never getting notified, the judge may believe you or feel sorry for you and give you a break.  But don’t count on it, because if the decision gets appealed, your chances aren’t good.

If you can’t prove that the service return is incorrect based on the documents alone, then you do have another option: file the motion to vacate and have your lawyer depose the person who supposedly served the papers.  This is going to cost a lot of money, but it gives you a powerful way to find the evidence you need: from the plaintiffs themselves.  You get to cross examine the process server and hopefully, find holes in his story or other evidence that will enable you to prove that they were lying when they filed the service return.

The cost of locating and deposing a process server will be at least $500, and you’ll have to pay your lawyer at least that much just to file the motion and conduct a deposition.  But if there is a lot of money on the line, or if you have a great shot at beating them at trial, or if you really need the judgment off your credit report to get a home mortgage loan, then it could be worth it.

Next: Vacating a Judgment for Fraud on the Court

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