Can A Creditor Force Me Into Arbitration Over My Debt?

You receive credit card statements for bills you cannot pay. Two, three, four or more arrive every month. They are followed by important looking envelopes containing collection letters from attorneys or debt collectors. Sometimes you receive two or more on each account. The mail piles up, along with the power bills and the car payment letters. You know you cannot pay the bills so you see no need to open the envelopes. If you are like many of my clients, you stuff them in a grocery sack or a shoe box. “Let them sue me”, you think to yourself. Alas, they may already have.

Those letters may contain an invitation to participate in mandatory arbitration of your debt. Many creditors find it profitable to pursue you through the arbitration provisions of your contract rather than deal with the Court system. In a recent Bankrate.com article by Amy Buttell Crane, “Binding arbitration can tie up consumers”, Paul Bland, an attorney with Public Justice, a nonprofit devoted to consumers’ rights issues, is quoted as saying, “The vast majority of arbitration claims involving consumers are collections actions brought by creditors against consumers. For instance, the National Arbitration Forum is doing hundreds of thousands of arbitration cases where a creditor is invoking arbitration in order to get a customer to pay overdue balances.”

The enforceability of arbitration clauses varies by state. Illinois adopted the Uniform Arbitration Act and allows creditors to confirm and enforce an arbitration award or decision against you the same as if a judgment was rendered by the court system after a full blown trial.

Ms. Crane offers sage advice, “[i]t’s vital to pay attention to any communication from your creditors. If you do receive a demand invoking an arbitration clause, you’ll at least have a chance to present your side and head off an automatic judgment against you.” Because so many wait until being sued before seeking legal advice, an arbitration notice is a wake up call to let you know time is running out and the creditor has started to get serious about collecting the debt. In short, if you reach the point where you are not opening your mail, it is time to call your lawyer to explore your debt relief options.

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