Sarah Edwards | March 07, 2023
Summary: If you have a credit card or loan debt like most Americans, it’s vital to understand your rights and those of your creditors. Many credit contracts contain provisions for binding mandatory arbitration. Learn what credit card arbitration is with the help of SoloSuit.
If you’ve ever been in a dispute with a creditor, you may have been subject to mandatory arbitration. Mandatory arbitration is a type of alternative dispute resolution that foregoes a legal trial. While either a creditor or the debtor can initiate mandatory arbitration, both parties try to avoid it since it can be expensive.
During mandatory arbitration, the initiating party asks a third party to oversee the outcome of a dispute. For instance, the creditor might ask a third-party arbiter to review your record of non-payment and rule in their favor, allowing them to collect money from you via a judgment.
You can also initiate mandatory arbitration against the creditor. However, few people choose to do so unless they have a valid reason.
Are you being sued for debt? Get help filing an Answer with SoloSuit.
Credit card companies won’t choose arbitration over a court case unless they have a compelling financial reason for doing so. Credit card arbitration is usually more costly than simply suing you in court. Thus, you’re more likely to receive a Complaint from a creditor than a motion to arbitrate.
The primary exception to this rule is when you owe a significant amount of money to a creditor. For instance, they might arbitrate your case if you’ve racked up a $50,000 credit card debt with a creditor and stopped making payments. The cost of arbitration is more expensive, but there’s less chance of losing their claim against you.
In a court case, debtors can hire attorneys or present arguments that a judge might agree with. As such, the creditor could lose a judgment worth thousands of dollars.
On the other hand, arbitration cases are usually more likely to resolve in favor of the creditors. At least, this is true for California, the only state that publishes arbitration for the public. It can be safely assumed that the results are similar in other states.
It’s important to note that if you lose an arbitration claim, you can’t appeal the outcome unless you have a significant reason.
A minor disagreement regarding the dollar amount of your debt or your repayment history isn’t sufficient grounds for an appeal. Instead, you’ll need to show that your case involved fraud or a conflict of interest on the part of the arbiter.
One scenario where arbitration may be advantageous is when your account isn’t worth much.
For instance, if you owe $500 to a credit card company and file a Motion to Compel Arbitration, your creditor may simply give in and walk away from the case because of the high cost of arbitration. Arranging arbitration can cost thousands of dollars — much more than you currently owe.
Don’t get too excited just yet, though. A judge will make the final decision about whether arbitration is appropriate, meaning you must have a solid reason for initiating it. Avoiding paying the debt isn’t one.
For more context, consider the following example.
Example: Joan owes her credit card company, Retail Cards for You, $1,000. She can’t make payments anymore, so she decides to force Retail Cards for You into arbitration. She thinks they might write off her debt rather than pay arbitration fees. Joan files a Motion to Compel Arbitration with her local court. After reviewing Joan’s claim, a judge thinks her case is frivolous. He dismisses her claim, and Joan loses the money she spent on the court case. She also still owes $1,000 to Retail Cards for You.
Check out the following video to learn more about how arbitration can help you.
The two main arbitration groups are Judicial Arbitration and Mediation Services, Inc. (JAMS) and American Arbitration Association (AAA).
JAMS is an older organization that requires the initiator to pay fees for its services, while AAA is a newer service that benefits creditors since it’s cheap. According to AAA, nearly half of all cases incur no arbitration fees.
When AAA came along, many creditors amended their agreements to allow their consumers to choose between JAMS and AAA. In most situations, it’s better to require your creditors to handle third-party arbitration through JAMS since they’ll incur fees that may make it inefficient to pursue further action on your case.
Most people don’t seek out arbitration with their creditors. They’d rather pay their debts off or settle them. However, if your creditor sells your account to a debt collection agency, it’s wise to understand the arbitration process, which may benefit you in certain situations.
Upon receiving notice that your account is with a debt collection agency, ask them to validate the debt. If you can afford it, settle the debt or set up a repayment plan. If you can’t, be aware that the debt collection agency may initiate a lawsuit against you.
If the creditor or debt collection agency files a legal claim against you, you’ll want to file an Answer with your local court. Include a Motion to Compel Arbitration along with the Answer, but specifically indicate that you prefer resolution through JAMS and ask for the creditor to advance the arbitration fees.
If a judge approves the arbitration, the creditor must pay for the arbitration per your credit card agreement. By electing JAMS, you’re ensuring they can’t choose AAA, which is cheaper.
Your creditor will decide whether paying for JAMS is worthwhile or whether they should simply write off the debt.
It’s important to realize that you won’t always have the opportunity to choose JAMS over AAA. In some cases, creditors don’t have stipulations concerning third-party arbitration. Read your credit card agreement carefully before considering arbitration.
Getting sued for debt? File a Motion to Compel Arbitration to avoid going to court.
You probably weren’t worried about dispute resolution when you first signed up for a credit card. After all, most people obtain credit cards intending to repay the money they borrow.
Still, it’s crucial to understand your rights when it comes to credit cards. That way, you’ll know what to expect if you ever have a dispute with your lender.
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.
>>Read the FastCompany article: Debt Lawsuits Are Complicated: This Website Makes Them Simpler To Navigate
>>Read the NPR story on SoloSuit. (We can help you in all 50 states.)
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.
Going to Court for Credit Card Debt — Key Tips
How to Negotiate Credit Card Debts
How to Settle a Credit Card Debt Lawsuit — Ultimate Guide
Need more info on statutes of limitations? Read our 50-state guide.
Why do debt collectors block their phone numbers?
How long do debt collectors take to respond to debt validation letters?
What are the biggest debt collector companies in the US?
Is Zombie Debt Still a Problem in 2019?
If a car is repossessed, do I still owe the debt?
Is Portfolio Recovery Associates Legit?
Is There a Judgment Against Me Without my Knowledge?
Should I File Bankruptcy Before or After a Judgment?
What is a default judgment?— What do I do?
Summoned to Court for Medical Bills — What Do I Do?
What Happens If Someone Sues You and You Have No Money?
What Happens If You Never Answer Debt Collectors?
What Happens When a Debt Is Sold to a Collection Agency
What is a Stipulated Judgment?
What is the Deadline for a Defendants Answer to Avoid a Default Judgment?
Can a Judgement Creditor Take my Car?
Can I Settle a Debt After Being Served?
Can You Appeal a Default Judgement?
Do I Need a Debt Collection Defense Attorney?
Do I Need a Payday Loans Lawyer?
Do student loans go away after 7 years? — Student Loan Debt Guide
Am I Responsible for My Spouses Medical Debt?
Should I Marry Someone With Debt?
Can a Debt Collector Leave a Voicemail?
How Does Debt Assignment Work?
What Happens If a Defendant Does Not Pay a Judgment?
How Does Debt Assignment Work?
Can You Serve Someone with a Collections Lawsuit at Their Work?
How Many Times Can a Judgment be Renewed in Oklahoma?
Does Debt Consolidation Have Risks?
What Happens If You Avoid Getting Served Court Papers?
Does Student Debt Die With You?
Can Debt Collectors Call You at Work in Texas?
How Much Do You Have to Be in Debt to File for Chapter 7?
What Is the Statute of Limitations on Debt in Washington?
How Long Does a Judgment Last?
Can Private Disability Payments Be Garnished?
Can Debt Collectors Call From Local Numbers?
Does the Fair Credit Reporting Act Work in Florida?
The Truth: Should You Never Pay a Debt Collection Agency?
Should You Communicate with a Debt Collector in Writing or by Telephone?
What Happens After a Motion for Default Is Filed?
Can a Process Server Leave a Summons Taped to My Door?
Need help managing your finances? Check out these resources.
How to Make a Debt Validation Letter - The Ultimate Guide
How to Make a Motion to Compel Arbitration Without an Attorney
How to Stop Wage Garnishment — Everything You Need to Know
How to File an FDCPA Complaint Against Your Debt Collector (Ultimate Guide)
Defending Yourself in Court Against a Debt Collector
Tips on you can to file an FDCPA lawsuit against a debt collection agency
Advice on how to answer a summons for debt collection.
Effective strategies for how to get back on track after a debt lawsuit
New Hampshire Statute of Limitations on Debt
Sample Cease and Desist Letter Against Debt Collectors
The Ultimate Guide to Responding to a Debt Collection Lawsuit in Utah
West Virginia Statute of Limitations on Debt
What debt collectors cannot do — FDCPA explained
Defending Yourself in Court Against Debt Collector
Arkansas Statute of Limitations on Debt
Youre Drowning in Debt — Heres How to Swim
Help! Im Being Sued by My Debt Collector
How to Make a Motion to Vacate Judgment
How to Answer Summons for Debt Collection in Vermont
North Dakota Statute of Limitations on Debt
ClearPoint Debt Management Review
Indiana Statute of Limitations on Debt
Oregon Eviction Laws - What They Say
CuraDebt Debt Settlement Review
How to Write a Re-Aging Debt Letter
How to Appear in Court by Phone
How to Use the Doctrine of Unclean Hands
Debt Consolidation in Eugene, Oregon
Summoned to Court for Medical Bills? What to Do Next
How to Make a Debt Settlement Agreement
Received a 3-Day Eviction Notice? Heres What to Do
How to Answer a Lawsuit for Debt Collection
Tips for Leaving the Country With Unpaid Credit Card Debt
Kansas Statute of Limitations on Debt Collection
How to File in Small Claims Court in Iowa
How to File a Civil Answer in Kings County Supreme Court
Roseland Associates Debt Consolidation Review
Do Debt Collectors Ever Give Up?
Can They Garnish Your Wages for Credit Card Debt?
How Often Do Credit Card Companies Sue for Non-Payment?
How Long Does a Judgement Last?
How Long Before a Creditor Can Garnish Wages?
How to Beat a Bill Collector in Court
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