Credit Card Arbitration not so good for the consumer.

Arbitration of consumer disputes sounds like a good idea. It’s a lot cheaper and quicker than court, and its popularity has been growing. But according to the San Francisco City attorney, as reported in the Wall Street Journal, the consumer is the loser in almost all arbitration cases in California. In the fours years ending in March, 2007, 18.075 cases went to arbitration in California and credit card companies won 18,045 of them. Thirty (fewer than .2%) were won by consumers.

The SF attorney blames the arbitration company, National Arbitration Forum (NAF), which operates in many states, arguing that NAF, among other things, improperly inflates awards, imposed attorney’s fees incorrectly and ignored consumer requests to appear at hearings.

Many of these disputes revolve around back debt owed to credit card companies. The consumer thinks they do not owe any or some of it, and the credit card company thinks they do. In my experience with helping consumers, the credit card companies make a lot of mistakes, so I think the low rate of consumer victories in arbitration cases looks pretty suspect.

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