The scales of justice in arbitration

By: The VNN Team  //  Arbitration, Op-Ed

The New York Times once again has pointed out the atrocity of arbitration.

The most recent story, published Dec. 22, tells of a man who was sued over an old debt, yet was blocked from suing back.

According to the Times, “Clifford Cain Jr., a retired electrician in Baltimore, was used to living on a tight budget, carefully apportioning his Social Security and pension benefits to cover his rent and medication for multiple sclerosis.”

Cain was puzzled when he suddenly could not make ends meet. Months later, he discovered a debt collector had garnished his bank account after suing him for about $4,500 the company said he owed on an old debt. Cain said he never knew the lawsuit had been brought against him until the money was gone. Neither did other Baltimore residents who were among the hundreds of people sued by the collector, Midland Funding, a unit of the Encore Capital Group, in Maryland State Court, the Times reported. “Some of them said they did not even owe any money, or their debt had long expired and was not legally collectible, according to a review of court records.”

The Encore subsidiary was not licensed to collect debt in Maryland. Yet when Cain brought a class action in 2013 against Midland Funding, the company successfully fought to have the lawsuit dismissed. Instead, if Cain wanted to pursue Midland Funding, he would have to do so by arbitration. Because class actions aren’t allowed in arbitration, Cain and the others would each need to being an individual case.

What this results in is a juxtaposition of the worst kind. Encore and other debt buyers are using the courts to sue consumers and collect debt, conversely preventing those same consumers from using the courts to challenge the companies’ tactics.

It is unconscionable how any judge could allow a debt collection company to sue a consumer, yet block the consumer from suing the debt collector.

This is strong evidence to support a complete overhaul of the arbitration system in America. A process that’s alleged to “protect” the consumer instead leaves the consumer on the losing end time and time again. Businesses, be they large or small, can have their cake and eat it too.

An Internet search of arbitration cases will turn up a plethora of decisions, many contradictory, and some that are based on decisions from the early 1900s. Apparently there remain judges who stuck in the Charleston Era or they are simply ignorant to changing laws.

How a first world country that supposedly is so advanced can have such an antiquated system in place is mind boggling. Hopefully consumers will get mad enough to call for change. Until then, expect the status quo.

Image: Flickr/Michael Grimes