• DYE CULIK PC | Consumer Protection Division

The Top 3 Reasons Not to Arbitrate When a Debt Collector Sues You in Court

If you get sued by a debt collector there are three reasons you should not force the case to arbitration – even if you have the right to.

Approximately 83 million civil (non-criminal) lawsuits are filed every year. Of these, one of the largest categories of cases is for debt collection. Debt collection cases involve all sorts of debt – everything from defaulted credit cards, to traditional debt collectors, to debt buyers. Some collectors send a letter before they sue you and try to work with you, and others just get right to the point and file the lawsuit without ever trying to negotiate.

The Top 3 Reasons Not to Arbitrate When a Debt Collector Sues You in Court
The Top 3 Reasons Not to Arbitrate When a Debt Collector Sues You in Court

Though there are different types of debt-collection lawsuits, the thing almost all of the accounts being sued on have in common is this: there’s an arbitration agreement. Contracts for credit cards, loans, or other debts virtually always contain an arbitration clause. Though it is often written in tiny print, the arbitration clause has a big impact – it deprives you of your day in court if they sue you.

If you file a lawsuit in court against a debt collector for violating debt collection laws like the Fair Debt Collection Practices Act, the Consumer Protection Act, or the Debt Collection Act, one this can be virtually guaranteed. That is, that the collector will almost immediately file a motion to force the case into arbitration. Your lawsuit will be sent to an arbitrator who acts as the judge and jury, conducting the case in secret.

Nobody wants to get sued by a debt collector. So, if the collector sues you in court (they almost never take people to arbitration when they sue you to collect), you might understandably consider taking them to arbitration. After all, court is stressful for people without attorneys and it would take your case out of the court system.

Not so fast. Forcing the debt-collection case intro arbitration is a bad idea in almost all circumstances. There are three important reasons, explained below, why it’s better to keep a debt collection case in court rather than transfer it to arbitration.

1. The Outcome of Arbitration is Better for Debt Collectors Than for Consumers

Debt collectors almost always do better in arbitration than consumers do. Though arbitrators are usually ex-judges, and are by no means corrupt or “paid off” (as some people have wrongly claimed), the fact is that their fees are paid by a handful of big debt collectors and credit card companies. In my opinion – and I’ve handled a lot of debt collection cases – this gives them an unconscious bias in favor of the collectors. As the saying goes, it’s a bad idea to bite the hand that feeds you.

Sometimes even attorneys get confused in arbitration! Though our office has handled numerous lawsuits and arbitrations, one published report said that the majority of attorneys are unfamiliar with the different rules used in arbitration, leading to bad outcomes for their consumer-clients.

One attorney put it this way, and didn’t mince words: “arbitrations of consumer debt matters are a sham – the sole purpose of which is to assist debt collector clients in collecting money from consumers by creating an appearance that a fair and neutral arbitration has occurred and resulted in an enforceable award.”

The statistics bear out this conclusion. During a two-year survey of debt-collection arbitrations, the debt collectors won in 94% of cases. This means there is a 94% chance you’ll lose.

2. The Rules of Evidence Don’t Apply in Arbitration of Debt Collection Cases

Debt collectors often think that the rules don’t apply to them – and in arbitration, that’s often true. In a court proceeding, the rules used are the Rules of Evidence, strict guidelines for what information may be submitted for consideration by the judge or jury.

The Rules of Evidence are a key tool that our office uses when defending consumers in debt-collection lawsuits. How so? When debt collectors and debt buyers purchase debts, the paperwork is typically incomplete – it does not meet the requirements under the Rules of Evidence. Because debt collectors’ evidence is so deficient, our office may be able to get a case dismissed.

In arbitration, however, the Rules of Evidence do not always apply. The arbitrator is permitted to consider any evidence that he or she wants, even if it would normally be inadmissible. Debt collectors may have a case that is only based on circumstantial evidence, and that would be dismissed by a judge. But, the arbitrator can accept the evidence and say it is good enough to rule against the consumer and in favor of the collector. There’s no point in making the debt collector’s job easier for them.

3. You Can’t Appeal a Bad Arbitration Decision in a Debt Collection Case

The last reason not to go to arbitration when a debt collector sues you is that you cannot appeal. In a court case, you can appeal on very broad grounds, such as a mistake in law, incorrect evidentiary rulings, or incorrect factual assessments. In arbitration, though, you can almost never appeal. As one court correctly explained, “judicial review of an arbitration award is among the narrowest known in the law.”

The only grounds for appeal in most arbitrations is that there was overt corruption or fraud, which almost never happens. In arbitration, it is perfectly acceptable for the arbitrator to rule in favor of the debt collector or credit card company even if they had no admissible evidence and you deny that they own the account. The collector can then use the arbitrator’s decision to go after your assets, real estate, or sometimes even to garnish your pay. At that point, it is too late to go back to court.


As you can see from this post, arbitration is almost never a good idea if you’re up against a debt collector or credit card company. In fact, it’s almost never a good idea to arbitrate against any big corporation. Debt collectors know they’ll get a good result in arbitration, the know the usual rules won’t apply to them, and they know there’s nothing you will be able to do about it. When our office represents clients against debt collectors, we do it in court where there is accountability for collectors, judges, and juries.

If you are interested in learning more about these issues, the National Consumer Law Center put out a report called Forced Arbitration: Consumers Need Permanent Relief. It is worth a read and attempts to “expose the fundamentally anti-consumer, pro-creditor nature of

forced arbitration.”

If you need representation against a debt collector, our office may be able to help you. Dye Culik PC has represented hundreds of clients against debt collectors, credit card companies, and other creditors. We defend our clients’ rights aggressively, negotiating and litigating cases throughout all levels of the court system. Even if your case is not in court, contact us to see if we can help.