1 February 2009

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Beware of Mandatory Arbitration

I first learned about this from a consumer radio show, but I thought it was important enough to investigate further. I think everyone's heard about credit card interest rates jumping because of a late payment on a different card or bill--or credit limits being lowered without warning. This is a scary new situation to look out for.

If you have a credit card, you have probably already agreed to binding arbitration with your credit card company without even knowing it. Somewhere in a bill stuffer or in the tiny fine print of your credit card agreement, there is a clause that takes away your day in court should you have a dispute with your bank or get behind in your monthly payments.

Here's why this is a problem--the arbitrators work for the credit card company and rule in their favor as often as 99.8% of the time. That's the figure in California (one state where this information is public). The credit card company can even tack on large attorney's fees and charge you, and they almost always win.

What's even worse is that often these cases are then turned over to the courts, and the arbitration award becomes a judgement. A judgement can mean wage garnishment, a lien on your house, and ruined credit.

I hope you'll check out this recent article from Business Week.

If this makes you angry, please take a moment to call or mail the Minnesota Attorney Generals office where the largest arbitration company is headquartered (the National Arbitration Forum). It's my understanding the State of Minnesota is investigating them and their procedures. The attorney general's office is taking complaints, so if you have been victim of "arbitration" or would like to email a complaint about the process, please contact:

Attorney General
State Capital, Suite 102
75 Rev. Dr. Martin Luther King, JR. Blvd
St Paul, Minnesota 55155
Voice: (651) 296-3353 Toll-free: (800) 657-3787

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