Statute of Limitations on Civil – credit cards in Arizona

Credit V Contract - ARS 12-543 Screenshot

It was an old debt. The debt was from 2007 when I was pregnant with my youngest son. I had complications as I was older. There were required visits to the doctor and then, there was the mandated bed rest.

The doctor wanted me on 100% bed rest but I said I might lose my job. Even with the Family Medical Leave Act, I was having a C section without a doubt and needed those funds for the weeks off after delivery.

So, since my doctor was near the workplace, I worked 2 mornings per week. I had at least 10 co-pays per month for visits. I had co-pays for medicine and labs, etc. The medical at my work was good. However, the co-pays were an expense I was not expecting.

After the C-section, there were more complications. Surgery was deemed necessary. The expense for this would be at least 1500.

My credit card bills were behind. I had deferred a few but there was one that made it (what I would deem) impossible for me to acquire. I even stated on the phone – That is an impossible situation. There were 8 different qualifiers, if I recall correctly. I was short only 2. However, I was short and despite the “Payment protection plan”, I was not given any deferment. So, I had no real choices at that time. I was in grad school and struggling to get by. It was not an easy time, financially.

That credit card was let go. I admit. The card value was only something like 300 dollars, after all. I was sure that wouldn’t be so bad.

This was 2007. I knew that Arizona statutes were only good for 3 years for credit cards.

According to ARS 12-543, the statute of limitations expired at 3 years.

Then, there was a change to statutes! Credit card was considered 6 years under ARS 12-548.

I was concerned that the new statute would override the old one. Then, I realized… wait a second. No way. If the Statute of Limitations expired… that’s it, no matter what law came after that…!

So, why were they taking me to court? Why were they claiming contract? Maybe they were hoping for a default judgement. This happens a lot. People do not answer. They get intimidated by these tactics. I admit I even was concerned. I knew the SOL expired. I knew they were grasping at straws.

The truth is, had I not answered, they probably would have won by default. They were asking over 1k for a $300 credit card. You know what I think. I think that once a customer defaults and the account is 120 days past due  no more interest should be added to a card. Seriously. They stated it was over $800. It was a $300 card!

I was not really concerned but there was a concern. So, I researched and discovered there is a statute that covers change in law.

ARS 505 – Effect of statute changing limitation states: An action barred by pre-existing law is not revived by amendment of such law enlarging the time in which such action may be commenced.

In other words, no worries. Just because a new law is created, doesn’t mean the old action is going to be revived. However, this law office was trying to state the credit card account was CONTRACT!
What is the definition of contract? 
Written, signed, in Arizona.
The category is DEBT.  According to a very astute clerk of over 25 years, debt is Credit card. I agree. I also concur that an account can be closed if open.
If the lawyers show the account was closed, that is indicative of an account that was once opened. Only something open can be closed…
So maybe, if someone is in a situation where a lawyer or lawyers claim contract for credit card and the lawyers are not so foolish as to try to pass off the agreement (stating this is an open ended account) to the court. There are ways to prove the account was a credit card.
Breach of contract is different.  There actually needs to be a contract, to breach a contract!!
The East Mesa Justice Court in Maricopa County recently followed the holding in the DSS Financial v. Walrod case and dismissed a collection lawsuit brought by a bad-debt buyer, Action Financial, LLC, holding that the statute of limitations on a credit card account is three (3) years. See Action Financial, LLC v. Long, CC2008005084.

The West Mesa Justice Court of Maricopa County also recently held that the debt, which was an old credit card account, was an open account and thus barred by the three (3) year statute of limitations under A.R.S. § 12-543. See Action Financial, LLC v. Foran, CC2008189319.

These two cases may not settle the debate about the statute of limitations on a credit card debt in Arizona. However, the possibility of dismissal was there.

There were a few things at play here I want to express here:

1. A case prior to the change of the statute and the statute of limitations is expired, needs an answer the complaint with the fact the statute of limitations expired. Otherwise, there may be a situation with DEFAULT JUDGEMENT. Default judgement occurs when a case is brought to the court without an answer. Sometimes those past the Statute of Limitations may slide through!

2. If  the case was after the change of statute, I don’t know. I considered taking a look at other items such as right to represent.

I had the opportunity to work in Finance for a processor/acquirer. There I learned a lot about law governing and regulating credit cards.

The Truth in Lending Act defines credit card as separate from contract, I believe.

Arizona Statute:

ARS 12-548Contract in writing for debt; six year limitation; choice of law

A. An action for debt shall be commenced and prosecuted within six years after the cause of action accrues, and not afterward, if the indebtedness is evidenced by or founded on either of the following:

1. A contract in writing that is executed in this state.

2. A credit card as defined in section 13-2101, paragraph 3, subdivision (a).

B. If there is a conflict between another jurisdiction and this state relating to the statute of limitations for a debt action as described in subsection A of this section, this section applies.

But what about ARS 12-548?

A credit card is not a contract. So forget A1. Some law offices may try to take someone  to court and claim the open ended credit card account is contract when there is no note or contract but a simple agreement or disclosure. Therefore, no contract in writing is executed in the state unless someone signed a contract in writing executed in the state of Arizona.

A2 is where they may try to take someone. This may be used for cases after the 2011 change. The definition is clearly credit cards as 6 years. I don’t know what more can be done in these cases as I have no experience here. There could be a loophole like the right to represent or something similar.

Of course, this could be a great challenge for courts as NFC is becoming more in use.

Now, in the case where the Statute of Limitations expired prior to 2011, the law office may attempt to file a complaint stating the credit card account is contract. This really is the strategy they used on me.

I requested the plaintiff to provide the “contract”. They cannot. They could not. If the law firm is working for the original creditor HSBC, for example, the very first line in the agreement states that this is an Open Ended Credit card. In that case, I pointed this out that the lawyers admit this is open ended credit and the statute of limitations is far expired.

To make it a little more simple I will outline this situation that happened to me. The most important step for me was to file an answer. I was fortunate this was in justice court as the fee was lower than had this been a higher credit card and gone as civil in superior court.

1. Lawyers filed a complaint.

2. I filed an answer within 10 days.

3. They did nothing.

4. Case became inactive. When this happened, the plaintiff was sent an inactive letter, not me.

5. A disclosure was sent by plaintiff that included credit card agreement and disclosures. They did include paperwork regarding the right to represent. This is a required document if a servicer is collecting, I believe. In my case, the debt was purchased by Asset.

5 days after inactivity was due for dismissal (according to my calculations), the plaintiff filed a motion to set. I found this untimely and did not realize they did have until another week or so to file.

Note that even if a case is due for dismissal, this is entirely up to the judge. Untimeliness may not be a benefit due to inactivity. Further, some courts do require paperwork to activate a case.

6. I filed an objection to the Motion to set. I included the information about the case being past the Statute of Limitations on Credit. I included the “agreement” (an unsigned disclosure from HSBC) and highlighted the part that stated – in the first sentence that this was an open ended account. (NOTE: Remember, if a yellow highlighter is used and the document is copied or faxed, this could black out the part you want highlighted! I simply underlined the section.)

I stated the fact the Statute Of Limitations on open accounts was over in 2010 and that the Law office admits in their own paperwork they filed this is an open ended account!

Then, I respectfully moved the court to dismiss with prejudice based on the untimeliness.

and then….


7. Motion DENIED



Of course, I could not really afford a lawyer for this phase. I was considering this if I had to go for appeal. It never got to that point. And now the real question is, take the LSAT in Feb or June!



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