Dena Standley | March 06, 2023
Summary: Arbitration can resolve a dispute without incurring the extra cost and time used in litigation. The process is confidential, and you get a decision within the shortest time possible. Arbitration goes through several steps to ensure it serves its purpose well, and SoloSuit can help you start the process of moving your debt lawsuit to arbitration.
Understanding how arbitration works is essential when seeking to resolve a dispute because you'll know what to expect and how to maximize every step in the process. Arbitration is common in the business world, where people handle employment contracts, retail contracts, partnerships, and credit card agreements.
These transactions often have an arbitration clause in the contractual agreement, and both parties must abide by it. To illustrate, the following is an example of CitiBank's arbitration clause in their credit card agreement that most consumers rarely pay close attention to when signing up for a credit card:
“You or we may arbitrate any claim, dispute, or controversy between you and us arising out of or related to your Account, a previous related Account, or our relationship (called “Claims”). If arbitration is chosen by any party, neither you nor we will have the right to litigate that Claim in court or have a jury trial on that Claim. Except as stated below, all Claims are subject to arbitration, no matter what legal theory they’re based on or what remedy (damages, or injunctive or declaratory relief) they seek.”
Arbitration can also be used to resolve relational matters that may otherwise get out of hand or when it is too costly to go to court. Today, SoloSuit will discuss everything you need to know about arbitration and how it works.
Arbitration is a way of resolving a dispute or disagreement between parties in a working or personal relationship. When both parties agree to arbitration, they allow an independent and neutral person to make an informed decision regarding their dispute.
The individual chosen is called an arbitrator. They can be appointed by the court or chosen unanimously by both parties. For instance, parties can choose an arbitrator with technical expertise related to their dispute or someone with legal qualifications. Often, arbitrators are retired judges.
Notably, the arbitrator's decision is legally binding, and unless in special circumstances, you cannot go to court to dispute it. For example, if you had a serious credit card dispute with CitiBank and you're not satisfied with the damages awarded, you cannot go to court to ask for more.
Although arbitration is considered an Alternative Dispute Resolution (ADR), it is uniquely different from the others (medication and conciliation). For instance, in conciliation and mediation, the outcome of the arbitration process can be accepted or denied by one or both parties—unlike arbitration, where the arbitrator can make the outcome binding to the parties.
Similar to courtroom proceedings, arbitration also has some rules and procedures that govern how the arbitrator will run the process and the role of the parties involved. When a contract contains an arbitration clause, the document will outline the rules to be used in the arbitration process. If the contract with the dispute says a third party will be involved in the arbitration, the individual or firm will specify if they already have the rules and procedures laid out beforehand.
Arbitration's diverse nature and the allowance given to parties to draft their own rules make it almost impossible to set rules and procedures that apply to all arbitration. Notwithstanding, the following are some rules and procedures that those going into arbitration must address:
Suppose you have a pending credit card dispute. In that case, you may not have much to say about how the arbitration process will be conducted because credit card companies assign arbitration firms (third parties) the task of issuing the rules and procedures. This practice has been investigated as there are existing allegations that credit card companies and other debt collectors have a vested interest in working with arbitration firms that are more likely to side with the creditor during the arbitration process.
Arbitration is one of the alternative dispute resolutions that people choose after they weigh the advantages and disadvantages and see it as a better option than litigation, mediation, or conciliation. The following table outlines the general pros and cons of arbitration over some or all the other methods.
|Hearing can be private and confidential, and transcripts are not part of public records||Arbitrator plays the role of jury and judge, making the outcome an individual's point of view|
|Simplified procedures with less time-consuming and expensive processes||Sometimes, the rules and procedures can be costly for one or both parties|
|Decisions are mostly final, enabling the parties to move on||Difficult to appeal an arbitration decision even when the arbitrator made a mistake|
|Both parties must agree on the arbitrator||One party can be forced into arbitration due to a contractual agreement having a third-party already assigned the task|
|Often takes less time to hear the case and make a decision compared to litigation||Compared to other ADRs, arbitration can take longer if the matter has multiple arbitrators and complex legal disputes|
|Cost-effective method—depending on the case||On rare occasions, arbitration can be more costly, especially in non-binding arbitration where one party can go to court|
Did you know a debt collection agency can sue you for a delinquent debt even when you signed a credit card agreement with an arbitration clause? Force a lawsuit out of court by filing a Motion to Compel Arbitration into your court case. SoloSuit can help you draft this document, customized to your case, in a matter of minutes.
Watch the video below to learn more about how filing a Motion to Compel Arbitration can help you win your debt lawsuit:
Now, let’s use an example to make it clear.
Example: Travis had an outstanding debt of $9,500 with CitiBank. He hadn't paid the debt for two years, and CitiBank sold it to First Credit Collections (FCC). When he received a lawsuit from FCC, Travis did some research online and found SoloSuit’s video about how most credit card companies have an arbitration clause. Fortunately, CitiBank had one, and he filed SoloSuit’s Motion to Compel Arbitration into his case. This document forced the lawsuit out of court. CitiBank did not want to pay for the arbitration process as laid out in their agreement. Hence, FCC requested Travis to settle for $4,500. He negotiated it down to $3,000 and signed a written agreement.
Before arbitration begins, parties usually try to resolve issues by holding formal or informal meetings. For example, in a workplace dispute with employees, the workers union representatives will meet with the company bosses to try and come to an understanding. If all fails, they may agree to an arbitration process, or one party may initiate it.
In the case of a consumer and a credit card company dispute, the consumer will raise the complaint with the company and talk to a representative. If they fail to resolve the matter, the consumer can start the arbitration process if the clause is in the credit card agreement.
The arbitration process is generally the same in either of the above cases. Let's look at the step-by-step process of the entire arbitration process.
The initial process of arbitration starts when one party gives a notice to the other party of their intent to solve the dispute by arbitration. The notice should also outline the nature and basis for the proceeding. The other party receives a timeline to respond to the notice and state whether they agree to the dispute resolution via arbitration. Once the party agrees, they move to the next step.
Usually, a contract states which arbitration firm to file your complaint; if it doesn't, you can file with the American Arbitration Association or any other affordable local arbitration firm. Be prepared to pay filing fees in both cases.
The arbitration firm usually works with the parties to identify and choose arbitrators based on the criteria the parties agreed on. For instance, both parties can suggest a few names and decide whom to pick.
Some arbitration firms also suggest and invite arbitrators to preside over your case, if you have that option in your rules and procedures. After they give you their choice, you must discuss with the other party whether you accept the suggested arbitrator. If you disapprove, they will look for another person and go through the same process until you research a unanimous agreement.
Before the firm recommends one to you, the arbitrator often reviews your case, checks for conflicts, then submits a signed oath document—if they accept the task.
Once you've agreed on the arbitrator, they begin their job by conducting a preliminary hearing with you and the other party. This proceeding discusses the critical issues in the case and procedural matters, including depositions, witnesses, and information sharing. Afterward, the parties prepare their case separately and exchange information. After the exchange, you can work on how you will respond and object to any information you receive in the exchange.
In this stage, both parties present their case before the arbitrator. You'll give your arguments, call witnesses, and present evidence to argue and defend your position. The rules and procedures often dictate the hearing process. Consequently, the time awarded for cross-examining and questioning the witnesses may be limited due to time constraints.
An arbitration hearing takes one to three sessions to end, unless a case is complicated. As a final act, you’ll submit a written brief to the arbitrator and give your closing statements. The arbitrator is given a timeline to decide on the case.
Once all parties have presented their cases and all submitted documents have been reviewed, the arbitrator closes the case and does not accept new evidence. Next, a date is set for giving the award either orally or in written form. Most arbitrators explain their decision to minimize errors and the feeling of unfairness. The award is legally binding, and the courts can force compliance on the party that fails to honor the ruling.
There's little room for appealing an arbitration case. Still, on rare occasions, a court may allow an appeal if the arbitration agreement has it stated and the arbitrators did not conduct themselves well; that is, they answered questions they shouldn't have or made a legal error.
In most cases, arbitration lets you settle disputes quickly and avoids the lengthy and often tiring litigation process. When done efficiently, you'll save money and even prevent severe relational constraints resulting from aggressive court hearings.
In addition, a consumer with an outstanding debt can force a lawsuit out of court if the contractual agreement has an arbitration clause. Use SoloSuit’s Motion to Compel Arbitration to force a debt collection lawsuit out of court. But first, respond to the suit with an Answer to prevent the collection agency from receiving a default judgment against you.
If the agreement does not have an arbitration clause, you can also try settling the debt with the help of SoloSettle, a tech-based approach to debt settlement. Our software helps consumers, like you, to negotiate a debt settlement with debt collectors and creditors. They may accept your offer because they do not want to go through the entire legal process if they realize you know your rights and can fight in court.
SoloSuit makes it easy to fight debt collectors.
You can use SoloSuit to respond to a debt lawsuit, to send letters to collectors, and even to settle a debt.
SoloSuit's Answer service is a step-by-step web-app that asks you all the necessary questions to complete your Answer. Upon completion, we'll have an attorney review your document and we'll file it for you.
Here's a list of guides for other states.
Being sued by a different debt collector? Were making guides on how to beat each one.
You can ask your questions on the SoloSuit forum and the community will help you out. Whether you need help now are are just look for support, we're here for you.
Is your credit card company suing you? Learn how you can beat each one.
Need more info on statutes of limitations? Read our 50-state guide.
Need help managing your finances? Check out these resources.
Out Debt Validation Letter is the best way to respond to a collection letter. Many debt collectors will simply give up after receiving it.
"Finding yourself on the wrong side of the law unexpectedly is kinda scary. I started researching on YouTube and found SoloSuit's channel. The videos were so helpful, easy to understand and encouraging. When I reached out to SoloSuit they were on it. Very professional, impeccably prompt. Thanks for the service!" - Heather