Four Magic Words That Could Wipe Out Your Credit Card Debt

(Reprinted from The Oxford Communique at

There are “four magic words” you can say if a collection agency ever comes after you for any unpaid debt. You say the words . . . and your debt can get eliminated all at once.

I know that sounds unbelievable, but NPR did an investigation of this for its show This American Life. In it, a couple got a $3,762.20 credit bill instantly wiped out because of this special sentence.

Here’s how the scenario unfolded . . . It involved a couple named Frederick and Keanne. Fred was buying houses, rehabbing and selling them, which was going great until the housing market fell apart in 2008. As a result, the couple ended up taking on some debt.

Ultimately, they got a notice in the mail saying they owed $3,7672.20 to a company called LVNV Funding and were being summoned to appear in court.

Frederick and Keanne knew nothing about LVNV. The main reason they went to court was to figure out what was going on.

At the court hearing, they learned that, when they failed to pay off their American Express bill, the credit card company sold that IOU to LVNV. Obviously, those kinds of sales to collection agencies make for big business. There are lots of companies that do this.

But here’s where it got interesting . . . Fred and Keanne wanted to know what the specific unpaid charges were, so they said four words that turned out to be magical.

“Show me the evidence.”

It turns out the lawyer representing LVNV didn’t know what the specific charges were . . . which isn’t unusual. When uncollected debts are turned over to firms like this, they often only receive a statement giving the total amount owed, no specific transactions. Nor does the collection firm have the original contract from when the credit card was initiated.

The bottom line is: If you show up in court and say the magic words, and the collection firm can’t come up with it, the case is dismissed. The debt is expunged.

So when these companies take people to court, they’re betting you won’t show up . . . because people usually don’t. The no -show rate is between 80% and 90%.

What that happens, you lose. But when you do show up and say the magic words, there’s a good chance you’ll win.



When the other side breaches its contract with you, what are your legal remedies? There are three. Breach of contract, rescission and specific performance. Which one or ones are available to you depend on circumstances and the value of the subject of the contract.
Breach of Contract
The contract you signed to buy the car said the car had 30,000 miles. It turns out the car has 45,000. This is not enough of a discrepancy to want to unload the car, but it does mean the car has less value than you paid for. Or your company buys 1000 widgets. 90 of them are defective and unusable. There is no point in sending back all 1000, but you want to be compensated for the 90 bad ones. In short, situations where you don’t want to repudiate the whole contract, but you want to be compensated to the extent the other side fell short on some portion of its promised performance.
Your remedy is breach of contract. What can you recover? The value of the defective items, interest if it applies, consequential damages (like the costs of shipping back the 90 bad widgets and possibly lost profits), reasonable attorney’s fees and court costs. You cannot recover for any emotional distress or inconvenience caused by the whole incident.
Let’s say the car you bought which you thought had 30,000 miles actually has 100,000 miles. Now the discrepancy is so great that you effectively received an entirely different car than you thought you were buying. You don’t want money for the difference: you want the car returned to the seller and all your money returned. Or let’s say there are 600 faulty widgets, you were buying them to resell to a regular buyer, but that buyer refuses to receive lots of less than 500. Effectively, the 1000 widgets are useless to you. You want them all sent back and all your money returned.
This total repudiation of the contract is called rescission. Because the remedy is more extreme than breach of contract, you will have to show the court that the value of the deal has been completely or almost completely destroyed for you. If you win, you get back all your money, minus any damage you may have done to the car or widgets, plus interest if it has been a while, consequential damages, reasonable attorney’s fees and court costs.
Specific Performance
Let’s say you ordered 1000 widgets, but the seller, citing some excuse, only provides you with 400. You still need 500 at least to satisfy your buyer. You don’t want to just rescind because that would not enable you to satisfy your buyer. Rather, you want to force your seller to provide you with the other 600 widgets.
What you want is specific performance. Essentially, you are asking the court to issue an order forcing the other side to fully perform. In addition, you can get your consequential damages (which may or may not include costs incurred with your buyer) along with reasonable attorney’s fees and costs.
Understand that this is a very elementary explanation. Do not try to pursue any of these claims without a lawyer. The short term savings of doing it yourself will undoubtedly result in a much larger loss in the long term when you lose.



Many of us have done it. We write a blog, or make an entry on Facebook, or put together a marketing brochure or email. Just words on the page gets hard to read. So we spice up the message with photos we pull off the internet or from our cellphone camera. But even though this is done frequently, there can be consequences. Not only are some of those photos copyrighted (the subject of another blog), but in Arizona, the use of those photos may subject you to a cause of action called Appropriation.
The tort of Appropriation (also known as the Right of Publicity) can arise when you:

  • Use another person’s name or likeness,
  • For your own advantage,
  • Without that person’s consent, and
  • Injury to the other person results.

The tort can arise even when the only damage is hurt feelings. So if you use a photo that embarrasses someone, you may be looking at a lawsuit. Specifically, you may be looking at damages for mental anguish.
And if you are using the photo for commercial purposes, you may end up paying that person for a proportion of the profits attributable to the unauthorized use. The burden will be on you, not the other person, to show that the profits were the result of other factors besides the photo.
If, however, the purpose of the photo was “communicative”, rather than “commercial”, you are protected by the First Amendment. That is the defense that would save many of us. But the difference between the two is often a thin line, and hard to prove. The court will look at factors like whether the use of the photo has unique value to the person photographed, the relationship between the photo and the purpose of the work you insert it in, and how frequently the photo or photos are used in the work.
Also, once the subject of the photo is dead, there is no claim.



“Fraud” is one of those words that gets thrown around a lot. When something goes wrong in dealings with another person, and you feel like you weren’t treated fairly by the other person, you’re likely to assume what happened was fraud.
But in the law, fraud is a little more than you probably think it is. In fact, it is probably one of the hardest cases to prove. Why? Because it involves deciding what was going on in the other person’s mind when they said or did what they did. A person who does wrong is not likely to admit it out of his own mouth. So you have to find other ways to prove what he was thinking at the critical time.
So in the law, what constitutes fraud?
First, the person (or company through its agents or, maybe, its advertising) has to say something untrue. Second, and this is where it gets difficult, you have to prove that that person knew, when he made the statement, that it was untrue.
And sometimes it gets even harder because the statement in question is actually a non-statement. This is when the circumstances required that the person say something, and he doesn’t say it. This is called material omission, and it is also fraud. It’s just hard to prove. For instance, the owner of the used car had been told by his mechanic that the car only has a few hundred miles to go before it dies, and then the buyer asks if the car is drivable. If the owner responds that the car is just fine, this might be a material omission and, therefore, fraud.
Third, the person making the statement must know that the other person is relying on him for the truth. The car owner above knew that the buyer was relying on him, as the only person who knew the condition of the car, to tell the truth.
And there is another aspect to this reliance which also makes fraud hard to prove, namely, the person who relies on the statement must be justified in that reliance. For instance, if that buyer is a certified mechanic and would have been able to tell just by driving the car a few miles that something was not right, but he didn’t take the test drive, the reliance might not be justified.
Fourth, the misrepresentation, or the problem that was the subject of the misrepresentation, must be the proximate cause of the damage to the buyer. For instance, if the buyer takes the car and it is badly damaged in an accident before dying, the misrepresentation may not be the cause of the damage, or not all of it anyway. The accident would.
And finally, there must be damage to the buyer. There is no lawsuit if there is a misrepresentation but no damage is done. If the car ends up lasting for a good while, it may be that there was no damage from the misrepresentation.
One more thing . . . in Arizona, there is also a consumer fraud statute. It is a powerful weapon because it removes the reliance requirement. If someone lies, and that lie or the problem becomes the proximate cause of damage, there is a claim whether your reliance was reasonable or not.
The only problem is that the consumer fraud statute requires you to bring your action within one year from the time you discover or should have discovered that you’ve been lied to, as opposed to the three years you would have with non-statutory fraud.
Finally, because fraud is so complicated, do not try and litigate it without the help of a lawyer.



Recently, I’ve received more calls about car purchases gone wrong than any other subject.  These are calls I did not receive before the economy began to suffer.  But some car dealers have, unfortunately, resorted to taking advantage of the consumer in response to the recession.

I will tell you about two such practices.  The purpose of both is the same: getting the consumer into the car, allowing her to drive it for a few weeks until she is attached to it, then calling the car back citing some problem, in the hope that the buyer will have become so attached that she will comply with the new condition, which usually means paying more money.

The first practice is informing the buyer, a few weeks after the transaction, that the dealer could not get financing from the usual sources, and that the buyer must come in to sign a new contract, which invariably will include tougher terms, usually regarding interest rate.

At first, dealers were doing this without the support of any language in the contract.  But once lawyers started getting involved, the dealers started including language with the other boilerplate saying that the deal is contingent on the dealer finding appropriate financing.  The language was usually too small to read and incomprehensible even if you could read it.  Consumer lawyers got involved, claiming this practice was unconscionable and possibly fraudulent.  So the dealers finally went to their lawyers who drew up a separate document that had the contingent language in bigger, more readable print and requiring the buyer’s initials.  This document is probably enforceable in court.  So when you’re handed a sheet calling for your initials, be sure to read it closely.

One more thing . . . If you decide to let the deal go and demand your trade-in back, and the dealer says it is already gone, know that the dealer has broken state law, which requires it to keep the trade-in available until all contingencies are met.

The second practice – less frequent and more justifiable – relates to your trade-in. The salesman will usually ask you a number of questions about the car, which you should answer honestly.  But what about the things they don’t ask you about.  Are you off the hook?  No.  That same list requiring your initials which I discussed above will also include a provision stating:

“I understand that the amount showing as Trade Payoff is my responsibility, an estimate only, and subject to verification by my lien holder for a minimum 10-Day payoff.”

This means that, if the dealer within the first 10 days discovers a problem with the car which it believes affects its value, it can rescind the transaction unless you pay for that difference in value.  Since you probably made the deal only because of the amount you were getting on the trade-in, this can be a big problem.  You may love the car enough to pay the difference, but before doing so, require the dealer to verify his assessment of the decrease in value.

It may be possible for you to handle this negotiation on your own, but I don’t advise it. The dealer will be more responsive to a lawyer’s letterhead.


They’re Everywhere

If you ae a normally active adult, then you sign a document containing an arbitration clause at least once a week, and probably more often than that.  Virtually every time you sign a business’ form contract, it is pretty safe to guess that the boilerplate on the back, which you never read, includes an arbitration clause.  If you are a small businessperson, it is a pretty safe guess that all your contracts with your suppliers and servicers included an arbitration clause.

So What?

“So I sign them all the time. I admit I didn’t know that, but what’s the difference?”  In most cases, it makes no difference.  Few transactions get out of control.  Even where there is a problem with what we buy, it’s often not enough of a problem for us to make a fuss, and the seller, using good business sense, will often correct the problem.  But not always: sometimes the problem is expensive and sometimes the seller isn’t willing to just make it right.  So you want to fight for your rights.  And that’s when you run smack into the arbitration clause.

They’re Deadly

You’re thinking, “I’ll just go to court and get a judgment from my peers and get compensated.”  But not if you signed an arbitration clause. First of all, the arbitration clause is mandatory: if you signed, you don’t have a choice between court and arbitration . . . you must go to arbitration.  And unlike court, there is no right to appeal from arbitration: if the arbitrator is biased, too bad.  And most importantly, to my mind, you give up your basic constitutional right to a jury.

What do you get in place of a jury?  A professional arbitrator who is agreed on by the parties.  Most of them are former lawyers or judges with considerable legal experience.  That’s good.  The problem is that arbitration is their living.  They will not make a living on your case alone.  Rather, they must have continuing business. You’re going to be in arbitration once in your life.  The company will be in arbitration repeatedly and, therefore, represents the possibility of ongoing business for the arbitrator.  Conversely, if the arbitrator holds for you against that company, do you think that company will ever allow that arbitrator to work again in their arbitrations?  It is for that reason that the little guy in the arbitration — maybe a consumer, maybe a small business — so rarely wins.

How did this happen?

Very simply, many large corporations decided they just could not entrust lawsuits to juries because juries kept holding for victims, and sometimes in large amounts.  They tried many things to cut back on these verdicts.  They instituted what they called Tort Reform, which their media associates said was to cut down on “frivolous” lawsuits – i.e., lawsuits against business.  In some states, they put huge amounts of money into electing sympathetic members of the Supreme Courts, who would in turn cut down on those verdicts.  But the best way to cut down on the problem was to keep victims out of court altogether.  So they instituted arbitration clauses, claiming that those clauses were an improvement over “expensive” litigation in courts.  And this last strategy has succeeded remarkably well.

So what do we do?

The long-run soluton is for all of us to stop believing what we hear.  Everything we see on the internet or in the media is not true.  Remember who owns the media and what is in their interest.

For the present, look at the boilerplate on the documents you sign, rathe than just signing blindly.  The arbitration clause will not be set out to attract your attention, but it will be labeled “Arbitration”.  My suggestion is to draw a big X through the clause and put your initials in the margin.  “That doesn’t sound like lawyer advice.”  Well, it is.  When the issue of the clause’s enforceability is litigated, the company can never argue the fairness of the clause; so they argue that there was a “meeting of the minds” about the arbitration clause (even though you did not know it was there), and you are therefore bound.  The Xing out which I recommend raises serious questions – legally – about that meeting of the minds.

There may be other ways to contest the applicability of the clause, depending on the particular facts.  That is the reason you need to see a qualified and experienced lawyer as soon as possible.


Buying a used vehicle can be a nerve-wracking experience.  The sales person always give you his best pitch; you take the car for a test drive; it seems to run just fine; you decide to buy the car; you sign the purchase agreement; you shake hands with the sales person; and you drive the car off the lot.


Then your worst nightmare occurs. On the drive home, the car stops with oil gushing from the engine, and you realize for the first time that you have been stuck with a lemon.  “What do I do now?” “What are my options?” “What is the dealer required to do if he sold the car ‘as is’?”


The State of Arizona gives certain protections to consumers in this situation.  Each used vehicle sold by a dealer comes with an implied warranty of merchantability.   Arizona has determined that, to meet this implied warranty, cars must be substantially free of any defect that would significantly limit the use of the car for the ordinary purpose of transportation on any public highway.  In other words, if it is safe and legal to drive the car on the highway, the implied warranty of merchantability is satisfied.


Sorry to say this, but for things that don’t affect your safety (the radio quits working or the seat has a soda stain on it), you are out of luck.
If your car does have a defect covered under the warranty, you only have a limited amount of time to get it fixed.  A buyer has only 15 days or 500 miles, whichever is LESS, to discover the problem.  So if the transmission goes out on the 501st mile or the 16th day you have had the car, you will be on the hook for the repairs.  (It is also important to note that the implied warranty does not apply to damage caused after the purchase or any acts caused by the buyer of the car.)


Assuming you do discover the defect in time, what are you supposed to do?  You are required to give reasonable notice to the used car dealer.  Once you give notice, the dealer is allowed a reasonable opportunity to repair the vehicle.  You are required to pay half of the repairs, but only up to $25 for each repair.  If the dealer is able to fix the problem, you must take your car back, but if the dealer is not able to fix the problem in a reasonable time, you are entitled to return the car in exchange for a refund of the purchase price.
Some car buyers may want to buy a car even though it has a defect.


If this is the case, you are allowed to waive the implied warranty, but you are protected here, too.   The waiver which you must sign extends only to those defects which the dealer has disclosed to you.

LITIGATION: If I Hire A Lawyer and Bring a Lawsuit, What Will Happen?

Most people have never hired an attorney or gone to court for anything more serious than a traffic ticket. The process of litigation looks as mysterious to most people as fixing a car or coaching a chess team looks to me. Maybe this will help a little.


A civil case usually has six main stages: (1) pre-litigation negotiation; (2) the filing of initial pleadings; (3) disclosure and discovery; (4) dispositive motions; (5) trial; and (6) appeal. This process can be stopped if the parties settle which, statistically, happens more often than not.
Pre-litigation Negotiation
Because litigation is burdensome, not only financially but in other ways as well, most lawyers will attempt to negotiate a settlement before filing the lawsuit. In my experience, these attempts succeed well under 50% of the time, generally because both parties are still emotionally upset about what was “done to them”. I will sometimes forego this step in those instances where the other side seems to be a bully or a conman: those parties generally have to be punched with a lawsuit before they will take my client seriously.
Initial Pleadings
The plaintiff (the party which initiates the lawsuit) files a Complaint stating why the court has jurisdiction, alleging the key facts underlying the dispute, and the legal claims those facts give rise to.
The defendant (the other party) must then file an Answer which answers the statements made in plaintiff’s Complaint. The defendant may, at the same time, allege any claims he has against the plaintiff. Because you know the facts, you will have to work with your lawyer during the pleading period.
Disclosure and Discovery
A little over a month after the pleadings are completed, both sides have to file their mandatory disclosure. This is a process pretty much unique to Arizona. Both sides are required to state their legal claims, describe their factual position, state their position with respect to damages, identify their witnesses (lay and expert) and any witness statements, and produce all relevant documents. Again, you will have to work closely with your lawyer with respect to the disclosure.
Then, the parties enter the discovery period during which both sides use various discovery tools – interrogatories, requests for admission, requests for documents, request to inspect, depositions – to gain evidence for their own case and to force the other side to expose its case before trial. This period can be lengthy as the two sides fight over what they have to produce. This period can also get expensive if there are numerous depositions, especially if those depositions involve expert witnesses.
Dispositive Motions
In most cases that have gone this far, one or both sides will file a motion – usually a motion for summary judgment – which basically asks that Court to hold that the evidence so favors the moving party’s case that there is no point in letting the case go to the jury. This might be because the evidence is overwhelmingly one-sided or because some point of law prohibits the other side from winning under the facts that have surfaced during discovery. Many times, these motions end the case (except for appeal), even though most judges are reluctant to take a case away from the jury.
This is when you get to see the samurai in your lawyer. I have done trials as short as a few hours and as long as two months. By the time you get out of discovery, your lawyer will have a good idea how long trial will go, but it is impossible to tell now with any certainty. The keys to that trial will probably be your lawyer’s preparation (I find I spend 3-5 hours on preparation for every hour in trial) and the relationship you establish with the jury (do they like, trust, and believe you?).
If you lose at trial or in summary judgment, your attorney will discuss with you your prospects on appeal. There are many bases for appeal, so we cannot generalize now. Depending on the case and the complexity of the issues, it could take quite a while before you get a ruling on your appeal.

Increasingly, courts are ordering mandatory settlement conferences after a certain number of days have passed since the pleading stage. This is not bad: you are not forced to settle, and the settlement judges are often very experienced and qualified. Sometimes, the parties will on their own, especially early in the case, seek out mediation before an experienced lawyer or retired judge at which the mediator will take turns talking to the parties and their lawyers in an effort to settle the case. We have had a lot of good experience with mediation.

LITIGATION: What Court Do I Bring My Lawsuit In?

By Jesse Cook

Sometimes, where you bring your lawsuit can affect the outcome more than any other  factor.  You may not have a choice where you can file your suit, but sometimes you do.
Generally speaking, you can bring a civil lawsuit in Small Claims Court, Justice Court, or Superior Court.  Each of these venues is set up to handle different types of cases.


Small Claims Court
If the amount in controversy is $2,500 or less, you can go to Small Claims Court.  The good things about this?  Because procedures are simple, it is not hard to represent yourself, and lawyers are not allowed.  This is often a good thing because it would be very difficult for a lawyer to keep her fees much below $2500.


For a small claim, you do not have to stay in Small Claims Court.  For instance, if you want a lawyer, you can have the case transferred to Justice Court.  (If you win, you might get your attorney’s fees reimbursed to you.)  Remember that the other side has the same right to transfer to Justice Court.


Justice Court
Generally, Justice Courts have exclusive jurisdiction over all civil cases involving amounts of $2,500 to 5,000.  Also, if your matter is worth between $5,000 and $10,000 (not including attorney’s fees and costs), you have a choice whether to bring the matter in Justice Court or Superior Court.
The good thing about bringing such a case in Justice Court is that the procedures are simpler and, therefore, less expensive than those in Superior court. You will also get to trial faster in Justice Court.  Also, the filing fees are lower in Justice Court ($93) than in Superior Court ($301).  The bad thing is that, because Justices of the Peace are not required to be trained in the law, most are not.  This can be a problem if your case involves any relatively complex legal issues.


Superior Court
This is where all claims of $10,000 or more must be filed.  There is no ceiling on what you can claim.  Because you will have to strictly adhere to all of the rules of civil procedure, few try to go it alone without a lawyer.  You are permitted to do so, but keep in mind that you will get no special breaks because you are a layman.


Note that there are a few other factors affecting jurisdiction.  For those, you should contact an attorney.


We’ve all been involved in deals involving used property of some kind where the seller throws in an “as is” provision.  An ”as is” provision can show up in the sale of anything.  But it is probably most significant in connection with the sale of a home or real property since those deals usually involve a fair amount of money.

The communication inherent in an “as is” clause is “you’re on your own . . . don’t come back to me with any problems”.

If you’re going to enter a deal with an “as is” clause, you better be sure you really want what you’re buying.  The clause should be a red flag for potential buyers because it likely means the seller is aware of a pretty serious problem and doesn’t want to tell you about it.

But for those of you who have already bought a piece of property with an “as is” contract, you should know that you are not completely out of luck if you discover a serious problem down the road.

In Arizona, an “as is” provision in a real estate contract protects the seller only to a limited extent. “As is” means that the seller does not have to tell you about problems that you would discover on your own by doing a reasonable inspection (whether by a professional or by you). These are called “patent defects.” If the problem is one you could have discovered by walking through the house and looking closely (for example, perhaps, cracks in the walls), the defect may very well be “patent”.

But if you do this sort of inspection, and do not and could not reasonably have seen the problem, the defect is “latent”. If, for instance, the problem is a leaking roof, or mold, or termites, and there was nothing that would have made the problem apparent in your walk-through, then you have a good argument that the seller should pay for the cost of fixing the problem. If the problem is so serious that the property becomes uninhabitable or dangerous to your health, you may be able to get out of your contract altogether.  The reason is that, under Arizona law, a seller must tell you about these “latent defects” even if the contract has an “as is” provision.
The lessons from this?  Get the home thoroughly inspected (ideally, by a pro) before buying, whether there is an “as is” clause or not.  No one wants to buy a lawsuit.  But if a latent defect does appear after the purchase, and even though there was an “as is” clause, see an Arizona contract lawyer or business litigation lawyer because you may well have a remedy available to you.