Arbitration

The arbitration clause is a section of the credit card agreement, you know, the pages of fine print that they send you when you open an account. It contains legalese wording that usually states that if either you or the company chooses arbitration, then litigation is barred, meaning, they can't sue you, but only if you, or they, opt for arbitration. The clause usually specifies one or more of the three main arbitration forums: NAF, AAA, or JAMS. NAF was a pro-creditor scam which is no longer taking credit card arbitration cases. The purpose of these clauses was to preclude class-action lawsuits against the creditors.

Since the demise of NAF, exercising the arbitration clause has become a powerful weapon for consumers to use against creditors. If you have defaulted on a credit card, tell the creditor or collection agency that you elect arbitration. Then they can't sue you. If they try anyway, they have violated the Fair Debt Collection Practices Act.

Why are you better off in arbitration with AAA or JAMS than in court? First, arbitration is expensive, and the costs the creditor too much money. Second, the local courts are often very biased in favor of the creditors. Trust me, I know this from personal experience.

Check out the legal forum on creditinfocenter - dot - com, where there is a lot of good information on using arbitration in favor of debtors.

Can you elect arbitration at any point during settlement negotiations? Or do you use when a lawsuit has been filed?