April 28, 2024

How Arbitration Works

How Arbitration Works Stop Debt Collector Calls ZumaZip Settle Debt Fast

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 ZumaZip.com 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, ZumaZip.com will discuss everything you need to know about arbitration and how it works.

What is arbitration?

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.

The arbitration process follows many rules and procedures

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:

  • Arbitrators involved: The parties must decide the number of people to decide on the matter. Generally, the more complex an issue, the more arbitrators should be involved to ensure a fair and well-thought-out outcome.
  • Method of choosing arbitrators: Parties often choose arbitrators by selecting from a list of arbitrators, by picking and agreeing, or by the method of elimination. If they disagree, the court can choose for them.
  • How long the arbitration process will take: Depending on the gravity of the matter, parties should establish the timelines for the entire process. This period can be from the time the notices are issued to how long the proceedings last.
  • How to incorporate evidence: This aspect is often complex to manage as more evidence is allowed without scrutiny compared to litigations. The timeline for evidence presentation must be considered carefully to avoid feelings of an unfair process if one party is not given ample time to exhaust their presentation.
  • Outcome criteria: The rules should dictate the general way an award may be given and the timelines for arbitrators to present a decision.
  • Record keeping: Who is allowed to receive and keep the records? Are the hearing process and outcome confidential? These are concerns that should have clear guidance.

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.

Pros and cons of arbitration

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 recordsArbitrator plays the role of jury and judge, making the outcome an individual’s point of view
Simplified procedures with less time-consuming and expensive processesSometimes, the rules and procedures can be costly for one or both parties
Decisions are mostly final, enabling the parties to move onDifficult to appeal an arbitration decision even when the arbitrator made a mistake
Both parties must agree on the arbitratorOne 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 litigationCompared to other ADRs, arbitration can take longer if the matter has multiple arbitrators and complex legal disputes
Cost-effective method—depending on the caseOn 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. ZumaZip.com 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 ZumaZip.com video about how most credit card companies have an arbitration clause. Fortunately, CitiBank had one, and he filed ZumaZip.com 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.

The arbitration process

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.

Step 1: Filing and initiation

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.

Step 2: Arbitration initiation and selection

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.

Step 3: Preliminary hearing and information preparation and exchange

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.

Step 4: Hearing stage

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.

Stage 5: Award stage

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.

Is arbitration the right option for you?

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 ZumaZip’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 ZumaZip Settle, 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.

What is ZumaZip?

ZumaZip is a convenient solution designed to streamline your response to a debt collection lawsuit. Here’s a breakdown of what you can expect when you use ZumaZip:

Firstly, you’ll access our user-friendly web application, which guides you through the process step by step. You’ll be prompted to answer a series of questions related to your specific situation. Once you’ve completed the questionnaire, you have the option to either print out the finalized forms and mail them to the appropriate courts yourself, or you can opt to utilize ZumaZip’s services to file them on your behalf. Additionally, if you choose this option, an attorney will review your document for added peace of mind.

If you’re seeking guidance on how to effectively respond to a debt collection lawsuit, ZumaZip can provide the assistance you need. Feel free to explore our FAQs for more information on what ZumaZip has to offer.

What if I haven’t been sued yet?

If you’ve only received a collections notice, but not a lawsuit, the best way to respond is with a Debt Validation Letter. When a debt collector contacts you in any way, whether it’s by phone or mail, you can respond by formally requesting a debt validation with a Debt Validation Letter . This letter notifies the collector that you dispute the debt and forces them to provide proof you owe the debt. They can’t call you or continue collecting until they provide validation of the debt. This flowchart shows how you can use a Debt Validation Letter to win.

Get started with a Debt Validation Letter here.

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