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Chapter 3: The Credit Card Debt Industry

Arbitration Forums
Pre-dispute mandatory arbitration (PMA) appears in the fine print, or is added to, many credit card agreements. This means that card holders, in most cases unknowingly, give up their right to court justice when fighting the collection of alleged credit card debt.  This PMA in consumer agreements is usually called “signing your rights away.”

According to consumeraffairs.com;
“Arbitration bars consumers from having disputes heard in court, forcing them instead into private mediation that can be held in different states, forcing them to travel hundreds of miles and pay thousands of dollars in costs. Private arbitrators often enjoy cozy relationships with the very companies they mediate disputes for, particularly in the credit card and financial industry.”

The Federal Arbitration Act was enacted in 1925 because arbitration was and is supposed to be a desirable alternative to civil law suits for settling disputes.  Apparently over the years, the act’s intentions have been successfully subverted by credit-card-bank profit motives.  Most states have a similar state arbitration statute.

The credit-card-debt-collection arbitration strategy began with MBNA (before it was acquired by Bank of America) and its debt collection law firm Wolpoff and Abramson and one arbitration organization, the National Arbitration Forum (NAF).  After you made charges on your MBNA account, MBNA would send you a notice (looking like junk mail) that they had amended your credit card agreement to include pre-dispute mandatory arbitration.  Most account holders never took notice of this agreement change.  Then, if it became necessary to collect a bad debt after charge off, MBNA handed the account over to Wolpoff and Abramson, who threatened the account holder with arbitration if they did not settle or enter a payment plan.   Failing that, a few months later a notice of arbitration from Wolpoff and Abramson and the NAF would follow. 
According to a study done by Public Citizen, a non-profit organization with 100,000 members based in Washington, D.C., 96 percent of credit-card arbitration cases were decided against consumers.

When it comes to credit-card-debt-collection arbitration, there is the National Arbitration Forum (NAF) and then all the other arbitration forums.  Wolpoff and Abramson acquired the NAF and then merged with Mann Bracken to form a national integrated collection agency, junk debt buyer and arbitration collection organization.

According Public Citizen’s study, “with more than 1,600 part-time arbitrators on its national roster, NAF admits to handling more than 50,000 cases a year. In California alone, NAF handled 34,000 consumer arbitrations between Jan. 1, 2003, and March 31, 2007. . . . NAF identified virtually all of its California cases as “collection” cases filed against consumers by credit card companies or firms that buy debts from these companies for cents on the dollar. Fifty-three percent of those cases involved MBNA credit card holders. . . . All but 118 of the cases were filed against consumers by credit card/finance companies or firms that purchase their debts. In other words, consumers chose to bring only 118 cases before NAF while corporations chose this business friendly forum nearly 34,000 times – 99.6 percent of the total cases.”

Public Citizen concluded that "binding mandatory arbitration is a rigged game in which justice is dealt from a deck stacked against consumers." The Supreme Court recently ruled against consumer pre-dispute mandatory arbitration.  There is proposed legislation against it working its way through Congress.
For now, credit-card-debt-collection-arbitration is beatable.  The keys to beating it are:
1)    denying you agreed to arbitration;
2)    not participating in it, which would constitute contracting with the plaintiff and the arbitration forum;
3)    filing in court against it before the arbitration award is granted or within 30-90 days after it is granted depending on the state.  There is more detail on this in Chapter 7.
I did those things, and I beat credit-card-debt-collection-arbitration with no prior experience.

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