I got a letter from a collections agency threatning Arbitration? What is that? I'm scared!?

Question

I got a letter in the mail from Midland Credit Management, Inc regarding my debt with Verizon. This debt is from 3 1/2 years ago. It says to call them to arrange to pay the balance of $1096.08 by 8/10/07 .

It says " After evaluating you account, we have decided that it meets all the requirements for our arbitration process. Because you have not paid this debt or arranged for suitable repayment of the balance dud, we intent to submit your account for arbitration with the American Arbitration Association if we cannot resolve your account before 8-10-2007. This is your last chance to arrange repayment before we begin to expend costs related to the arbitration process. If an award is granted in our favor and costs are included in the award, we may also add these costs to your outstanding balance."

I am so scared! Please explain to me what this means. I'm afraid to call them, I don't know what to say and I don't want them to be rude with me. Thank you so much in advance.

Answer 1

Many, if not all, creditor contracts carry the arbitration language hidden somewhere in the fine print of the contracts. Since many people don't know their rights, the creditors or collectors get away with forcing people into arbitration.

If the arbitration clause was in the original written agreement, which it probably was, it violates a whole slew of laws.

It violates House Resolution 5162 which amends Title 15 USC 1601 of the Consumer Credit Protection Act (CCPA), it violates House Resolution 5162 which amends Title 15 USC 1601 of the CCPA and violates amendments to the Federal Arbitration Act (S. 192).

The above is only a few of the laws that it violates. There is also case law that proves mandatory arbitration to be considered unenforceable.
Even the Supreme Court is against arbitration that a person does not consent to but is coerced into it (which is what is happening to you by MCM saying pay up or face arbitration)

There is an extremely well written arbitration refusal letter that you should read and consider using.
You might click on my profile and click on the last link I have listed. Go into the Credit Forum and post in there about MCM and the arbitration and ask about the arbitration refusal letter. The posters on there will be able to direct you to the letter and will also be there to help you with any questions you may have about it.

The site listed in my profile is a free credit discussion board. The posters on that site donate their time and knowledge to help others, like those of us who answer on here.
The site where the letter can be found is an information site which everything on it is free to use.

Answer 2

Wow...this is going into new territory for me! Very good answer by Luke

I am aware of the arbitration process, but in my experience it has always been a precurser to going to court. If you have a dispute, you go to an arbitrator and try to work things out. If no agreement, it will go to the judge....who has read the arbitrator's report and will likely go against the side that was uncooperative. But agreeing to go to an arbitrator is usually something both sides agree to.

I've also seen cases where, in large contracts or with large businesses, an agreement for dispute resolution is included in the contract. This is generally to iron out differences of opinions that in many times are unforeseen is such contracts.

But wow.....this is different. I took at peek at Verizon's contact...and sure enough! Buried deep in the fine print and legal jargon is wording that in the event of any "Any controversy or claim", your dispute is sent to an arbitrator. It keeps it out of court, where they don't have to mess around with such trivial things as "legal rights" or "disclosures"....and it is worded so that you must accept whatever the arbitrator decides.

I sure do hope this is a state by state rule, because I haven't run into anything like this in Michigan. Got to do a bunch of research on this.

For now, take Lukes advice and get some legal opinions. And take this as a warning to carefully read over any future contracts for services to be sure this little gem is not included in it.

Answer 3

They use the word "arbitration" strictly as a scare tactic in hopes that you will do exactly what you're doing - freak out. Notwithstanding the fact that you should have paid the bill 3 1/2 years ago, or not even created it in the first place if you had no means by which to pay it, the worst they can do to you is file a legal action in court whereas they can subsequently garnishee your income. Needless to say, your credit record has already suffered. If you don't want to call and make payment arrangements, I suggest you start sending them even small payments. Their job is to force you to pay the money and it's usually done through tough, abusive talk and scare tactics.

Answer 4

The Scam of Arbitration

Debt collectors, junk debt buyers and bottom feeders are looking to enrich themselves through arbitration claims filed with the National Arbitration Forum, Minneapolis, MN. Some of the organizations filing arbitration claims include Wolpoff & Abramson, Baltimore, MD, Collect America (CACH & CACV) Denver, CO, Mann-Bracken, Atlanta, GA ,NCO Financial Systems, Baltimore, MD and Midland Credit Management.

Arbitration is an area most consumers have little or no knowledge of and the system is set up to take advantage of that. The National Arbitration Forum (NAF) is biased in favor of those who file claims because their filing fee of $250/per account is what keeps them in business.

To give you an idea of how this functions, let's use our Washington bureaucracy for an illustration: NAF is the Congressional representative writing laws. Debt buyers are the lobbyists looking for favorable results on their investments. They write a check to the NAF, the arbitration claim is filed, the NAF pays a local lawyer to rubber stamp awards in favor of the debt buyer and just like Washington, they make a ton of money, while you get screwed. Sound familiar?

The attorneys they use are from your local area (with exceptions) who are also paid a fee of $250/hour with the expectation they will handle up to six claims per hour. Do the math, does this sound ethical? The arbitrators rubber stamp their approval, many lie and sign statements that are false and perjured so they can stay on the money side of the NAF.

The arbitration process conducted by the NAF is a corrupt system of big bucks designed to screw the consumer who is mostly kept in the dark about the process and how it evolves. I have seen many awards where attorneys lied in their statements just so they could collect the $250/fee. (Does this sound like a lobbying organization?)

There are ways to take on this corrupt system and turn the tables on the National Arbitration Forum and the lawyers they pay to make awards against you they may not be entitled to. A national group of consumer attorneys is fighting the arbitration system head-on.

If you are threatened with, or served an arbitration claim get in touch with me for assistance and referral to an expert who can assist you. If you fail to respond to an arbitration claim, it could eventually end up with a judgment against you, so the time to take action is when you are threatened or served.

Contact us at: [e-mail] for assistance.

Answer 5

They will be rude with you because most bill collectors are a holes for some reason but I think arbitration means sue you or supena you, what you can do is call a debt consolidator, file bankruptcy which would be about 700.00 cheaper and you can put all your debt on the bancruptcy execpt now they changed the law to where you cant bankrupt on credit cards like you could before but everything else you can, espescially this phone bill and other bills so it may be worth it just to pay 3 or 4 hundred and get a lawyer to file for you, good luck!

Answer 6

Do you owe the money? If so, pay the bill. If not, tell them why you don't owe the money. The reason for the notice is that there is a four-year statute of limitations on contracts. They have to take legal action within four years or they legally cannot pursue payment of the bill.
There is nothing to be afraid of. They are protecting their legal rights. Arbitration is a clause in the contract. It means working out the situation without them filing suit against you.

Answer 7

It means pay your bill or they are coming after you and can sue you for the amount including court fees which means you can spend 5,000 instead of what you owe. Most of the time you can call up and just tell them..look I don't have the money and they will settled for a 1/3

Answer 8

It sounds like you may receive a court summons to appear before a judge. They can't put you in jail, but will probably place a lien against you, and this will be bad for your credit
record. I'd call them; muster up the courage. They are paid to collect, so don't expect them to be firm. Maybe there is some way they will negotiate a payment schedule.

Answer 9

Contact the creditor and arrange a payment plan with them if it's a debt that is yours. Do this sooner rather than later. This debt is already affecting your credit rating because its in collections.

Answer 10

listen to bobby's#1girl and regerugged- they know what they are talking about.
if you owe then you need to start up a payment plan- you're seriously damaging your credit which is vital to your financial health. this debt will affect your ability to get credit, get loans, and do anything with a finacial institution- but more too- more and more landlords and employers are checking credit scores- if you're credit is bad you make it that much harder to get a good job and a good appartment to boot-
the amount you owe is not that much- if its a legitimate debt you need to just pay it back
and DO NOT file bankrupsty over a measy thousand buck debt- (especially if you're young) bankrupsty ruins your credit for 7 years. that means 7 years of fighting to get credit, fighting to get loans and having to explain that to landlords and potential employers- don't do this to yourself over a thousand bucks! this should only be used when there is nothing left you can do. don't listen to the girl telling you to file for bankruptsy