Judson E. Crump, PC

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.

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

How to Vacate a Default Judgment – Alabama Consumer Defense Attorney Judson E. Crump

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Once a judgment is entered against you, the law presumes that it is valid, and there are only a few ways to undo the judgment.  Here’s how.

First, know that judgments are always presumed valid once entered, and the law generally favors finality of judgments.  This means that if you ask a court to vacate its own judgment, the burden is on you to show good reasons why.

There are only a few grounds on which a court can vacate a judgment. Rule 60 of the Alabama Rules of Civil Procedure lists them:

  1. Mistake, inadvertence, surprise, or excusable neglect.
  2. Newly discovered evidence that could not have been discovered before the judgment was entered.
  3. Fraud, Misconduct, or lies by the adverse party.
  4. The judgment is void.
  5. The judgment has been satisfied.
  6. Any other reason where it is clear and undisputable that allowing the judgment to stand would be patently unfair.

The first 3 categories have to be raised within 120 days of the entry of the judgment.  So if you got a default judgment entered against you, and you didn’t know about it until 6 months later, you can’t raise any issue of mistake, new evidence, or fraud by the judgment creditor.  So this is a rare remedy because most people find out about judgments months or even years after they’ve been entered.

Category #4 is the most common way to vacate a default judgment, because this category includes cases where the judgment creditor never served you with the original lawsuit papers.  To get a judgment, a plaintiff must prove that they served the defendant with the summons and complaint.  This is proven by a document filed with the court called a Service Return.  The service return is signed by whoever served the lawsuit papers, and there are a few ways this can happen:

  • A sheriff’s deputy signs the document showing who was served and when.
  • A private investigator or process server signs the document showing who was served and when.
  • A certified mail return receipt is filed, showing that the document was delivered to the residence, corporate office, or registered agent of the defendant.

If you were never served with the lawsuit papers, then it is possible to get the court to vacate a default judgment.  But you must prove that you were never served.  The service return is presumed to be the truth.

Step One: Reading the Service Return

The Service Return will state who served the summons, when it was served, and how it was served.  Here’s an example of a service return issued by a Sheriff’s Deputy:

Look at the bottom box. The deputy certifies that he served the Defendant’s mother, not the Defendant. The top box shows the address listed for the Defendant. If both of these are incorrect, that can be grounds to vacate a default judgment.

Using that case as an example, the Return shows that the defendant himself wasn’t served, but his mother was served.  It also shows that the address listed by the Plaintiff was at St. Jude Circle.  But in that case, the defendant didn’t live there.  This is important, because service doesn’t always have to be made on the defendant personally.  It can be made on an agent of the defendant (rare for individuals, unless they’re elderly and have signed a power of attorney) or anyone over 16 in the defendant’s household.

So the first thing you need to do when you want to vacate a default judgment is go to the courthouse and get a copy of the service return.  If there are multiple service returns, get a copy of ALL of them.  Read them carefully.  Did they serve you?  Or was it someone else?  If it was an ex-husband, parent, baby-mama, or minor child, then that doesn’t count.  You can get the judgment vacated.

If it was an adult in your household (like a spouse, parent living there, adult children, or live-in girlfriend), then you are stuck with it.

Next: When the Service Return Contains False Information

$6,000 Midland Funding Collection Lawsuit Defeated – Alabama Consumer Rights Attorney Judson E. Crump

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Midland Funding, LLC sued my client over an alleged balance due on a Target Credit Card.  We went to trial and won.

Like a lot of Americans, my client had suffered some financial setbacks that caused her to fall behind on some of her bills.  When she was unable to work out settlements she could afford, she started getting phone calls and collection notices from strange companies she’d never heard of.  One of them was Midland Funding, LLC.

Midland is a debt buyer, or as the credit reporting bureaus call them, a “factoring company.”  They claim to purchase large portfolios of charged off debts and then seek to collect them.  If you don’t pay them what they demand, they might sue you.

Luckily, the law requires that collection companies prove that they have the right to demand money from you before they can get a judgment against you.  You can’t just walk up to a stranger and say “Hey!  You owe $3,000 to Capital One, and I’m their collection agent.  So you better pay up.”

In my client’s case, they were asking her to pay them for a debt she allegedly owed to Target National Bank.  We took them to trial and challenged their proof.  We won.  You can read the Court Order here: Victory Judgment Midland v Delayo.

A New Scam: “Debt Validation Services!” – Alabama Consumer Rights Attorney Judson E. Crump

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There’s a new scam in town!  It’s called “Debt Validation.”

While the life of a consumer protection lawyer can be riveting, it isn’t every day that you see the birth of an entirely new scion of the American scam industry.  Well, today was my lucky day.  I got a call from a potential client (we’ll call him “Ricky”) who had questions about his dealings with a company called “Ace Services.”  They had offered him – at the low, low price of $2,136 – some “debt validation services,” which were supposed to somehow prevent his creditors from being able to collect from him.

The exact mechanism of this was not clear, and their website is equally obscure.  Most of it is filled with anonymous corporate puff (“The principles and managers at ACE have decades of combined experience in consumer finance and always place our customers needs first”), and their page on debt validation gives this detailed explanation: “Let the professionals at Ace connect with your lenders to determine the validity of a debt.”

How illuminating.

Their agent sounded more knowledgeable on the phone, so Ricky signed up.  He started paying, and put his debts into their supposedly trustworthy hands.

We don’t know what exactly they did for him – they never sent him statements to tell him what they were doing with his money, and they didn’t furnish him with copies of any documents they sent to his creditors.

But we do know what they didn’t do: deal with his debts.  A few months later, his creditors started coming after him for money again.  The “validation” service had failed.  His money was gone.

This is what always happens when you hire a debt settlement scam.  These folks call their (dis)service “debt validation,” but they use the tried and true methods of old-fashioned debt settlement scams.  It usually starts with an internet advertisement that directs you to a different company, then electronic documents are electronically signed.  (For some reason, debt settlement scammers love DocuSign.  I guess the lack of a physical paper contract makes it easier to hook the customer in before they have time to think about what they’re doing).

Then they start drafting money from your account and assure you with phone calls that you’re affairs are being handled competently, but you’ll have to be patient.  Then you don’t hear anything for a while, because your creditors are leaving you alone while they deal with the temporary but legally toothless paperwork that the debt settlement/validation company is sending them.  This leads you to think “Yes!  It worked!  I didn’t get scammed!  I’m going to be debt free!”

Until a few months go by and the debt settlement/validation folks have paid themselves from the secret bank account they set up in your name and then suddenly you start getting waves of phone calls and letters from new debt collectors asking you to pay off the debts you foolishly entrusted to scammers in Florida.  (NOTE: Most scammers are in Florida.  South Florida.  This is because Florida has an unlimited homestead exemption, and scammers know they’re eventually going to get sued, and they can pile up all their money in a multimillion dollar mansion and not lose it even if they get hundreds of judgments against them.)

And then you realize that your money is gone, and instead of paying your creditors, you paid a crook in South Florida.  This is inadvisable.  So here’s the lesson: NEVER EVER EVER HIRE A DEBT SETTLEMENT, DEBT NEGOTIATION, OR DEBT VALIDATION COMPANY.  They are all scams.

If you want more information about ACE Services, their website is www.ace-sg.com.  Their real name is:

Ace Sales Group, LLC
675 West Indiantown Rd, Ste 205
Jupiter, FL 33458.ace_sales_group_services-white2-300x116

Reversing a $7,000 Bank Account Garnishment – Alabama Consumer Rights Lawyer Judson E. Crump

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Midland Funding Garnished Over $7,000 from my Client’s Checking Account.  Here is how we fixed it.

Mr. Carter had a few unpaid accounts he wanted help resolving, so he went to a local credit repair organization.  They attempted to negotiate with some of his creditors on his behalf, including Midland Funding, who claimed that he owed them $9,029 for an old Sears card that he’d allegedly not paid.  They sued him in the District Court of Mobile County.  When he got the lawsuit paperwork, he immediately forwarded it to the credit repair folks.  They said they would step in and negotiate with the collection agency for him.  They did try to negotiate, but either Midland Funding or their lawyers didn’t want to deal with them (since credit repair organizations are not attorneys, creditors can ignore them if they want to), or they just could not reach an agreement that was acceptable to both sides.

Regardless of how negotiations went, nobody filed a written answer for Mr. Carter, so Midland took a default judgment against him for the full amount demanded in the lawsuit: $9,029 plus court costs.  The Court entered the judgment and Midland obtained writs of garnishment.  One of them went to Mr. Carter’s bank account, which contained all the money he could borrow and save up in order to try and settle his debts: over $7,000.  And in the blink of an eye, it was all gone.  Midland sent the garnishment to the bank the same day they sent it to Carter (which is perfectly legal in Alabama), and the bank immediately froze all the money in the account and sent it along to the Clerk of Court.

It wasn’t until after all this had happened that Mr. Carter came to see me.  We filed a motion to vacate the judgment based on what the Alabama Rules of Civil Procedure call ‘excusable neglect,’ meaning that even though he hadn’t responded in writing to the lawsuit within the 14 days required, he had a good reason for not doing so: he was under the impression that the case was being handled between the debt settlement company and the collection lawyers.

The judge granted our motion and set the judgment aside.  Click here to view the Court’s Order. (PDF): order-granting-relief-from-judgment

The Court set the matter for trial 2 months after that, and at trial, we won a judgment for the debtor.  You can see that order here: $9,000 Midland Lawsuit Win

Finally, and most importantly, all of the garnished money was released, and the Midland account was gone.  You can read the court’s order to release my client’s money here: Order to Release Garnished $$$.

This case was a great example of the sorts of serious problems that default judgments can cause you. We were fortunate that there were some extenuating circumstances in this case that the judge was willing to hear.  And we were also fortunate that my client came to me less than 120 days after the default judgment was entered, because after the judgment is 120 days old, the rules allow you fewer ways to vacate it.

After 120 days have passed, the only ways to get a default judgment set aside is to prove you were never notified of the lawsuit in the first place or prove that the plaintiff somehow committed fraud on the court.

If you live in Alabama and get served with a lawsuit, you should call a lawyer immediately.  If you can’t afford a lawyer, at the very least, you need to file a written answer.  But even if you have had a default judgment entered against you, there still may be some hope of fighting it.

Credit Associates – Is this Debt Settlement Company a Scam? – Alabama Consumer Credit Attorney Judson E. Crump

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Credit Associates advertises debt settlement services on TV and Radio.  Are they a scam?

I suspect that this outfit may be a scam, and I want to hear from anyone who has experience with them.  I saw this television advertisement recently:

A serious man in a business suit stares grim-faced at you from your TV screen.

 

“If your credit card debt is out of control, if you’re over your head in monthly payments,” he says, “there’s a secret the credit card companies don’t want you to know: If you have more than $5,000 in credit card debt, you have the right to settle that debt for a fraction of what you owe.

That’s bad news for the credit card companies, but (enter the hopeful piano music) its great news for you.”  Grimface smiles for the first time.

“We are Credit Associates, and we’re offering you free information on how to virtually eliminate your credit card debt with a monthly payment you can afford.  To see how much you could save, call now.  1-800-507-4987.”

 

“Don’t declare bankruptcy.  Don’t consolidate.  Give us ten minutes and we could save you thousands.  After all, we depend on your success, and offer a guarantee so there’s no risk.”

You can see the video here:

I heard one on the radio while driving through Robertsdale, Alabama yesterday.  I believe it was on 96.1 “The Rocket” FM.

The ad immediately drew my attention because it makes a very bold claim: “if you have more than $5,000 in credit card debt, you have the right to settle that debt for a fraction of what you owe.”

I don’t believe this is true.  I am a real Alabama lawyer with years of experience dealing with debts in and out of court, and I can say that you DO NOT have the right to settle any debt without the creditor’s consent.  And your rights to settlement – at least in Alabama – have nothing to do with how much debt you owe.  Personally, I believe that it is just flat-out fraudulent for a business to make this sort of promise in order to get customers.

Of course, making false claims is not entirely new to the debt settlement industry.  It is one of the scammiest industries out there.  I have had numerous clients over the years who have been tricked into paying money for months and months to debt settlement outfits and still get sued years later by the very same creditors who were supposed to have been dealt with.

If you have hired Credit Associates or a similar debt settlement company and have questions about your rights, please call me at 251.272.9148.  Don’t think that just because you’ve already started paying them that you are stuck with them forever.  You have rights.  Contact us for more information.

Convergence Receivables, LC Collection Lawsuit Beaten at Trial – Alabama Consumer Rights Lawyer Judson E. Crump

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Convergence Receivables sued my client for a $4100 credit card bill.

We went to trial and challenged the collector’s proof of their right to collect.

We won.  Total savings were $4,268.28.  Not a ton of money, but it was a break that came right when my clients needed it.

Another collection lawsuit win for the working folks of Alabama.
Another collection lawsuit win for the working folks of Alabama.

 

$4k Convergence Receivables

"Licensed in Alabama and Texas. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code. No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers. The use of this website DOES NOT establish an attorney-client relationship between Judson E. Crump, PC and you."