Mandatory Arbitration Used to Collect Debt
Credit card companies are using mandatory arbitration…
A study by the consumer group Public Citizen reports that credit card companies are using binding, mandatory arbitration as a new way to collect debts that wouldn’t normally be able to be obtained. Consumers are accepting arbitration when they are coerced into believing that it’s the only way to resolve a dispute. While arbitration can be a fair, efficient way to solve issues - it has much more appeal when the process is voluntary and is chosen only once a dispute arises. “Consumers have fewer tools to fight back through arbitration. There is no due process. Everything is secret and consumers must accept this forum with no right to go to court,” said Laura MacCleery, director of Congress Watch for Public Citizen.
The study revealed that arbitrators decided most cases based on documents supplied by the company without the presence - or sometimes without the knowledge of the consumer. “Consumers often don’t show up because they say they never received notice and don’t know that the system is binding, that it is a legally enforceable judgment,” said MacCleery.
Cable and cell phone contracts, insurance policies, auto financing and mortgages include clauses that require all disputes to be settled in a private forum instead of in a court of law - leaving the company holding all the cards, according to Public Citizen. The report surprisingly found that companies, not consumers, are bringing cases to arbitration. There were only 118 consumer cases out of 34,000 total cases and a mere 4% of those consumers won their case. Almost all (99.6%) credit card disputes studied were brought by corporations. Companies came out on top 94% of the time in the 19,000 cases studied by Public Citizen.
Bills currently before Congress would ban forced arbitration, The Arbitration Fairness Act of 2007 (H.R.3010 and S.1782) would make it illegal to require binding, mandatory arbitration in consumer and employment contracts between parties of unequal power. Until then, your best bet is to talk to a lawyer before you accept arbitration to solve any disputes.
