After the second major arbitration firm has removed itself from the consumer credit market, uncertainty remains about how credit card disputes will be resolved under current contracts.
On Tuesday, the not-for-profit American Arbitration Association said it will no longer take on disputes involving credit card debt, unpaid cell phone bills and other consumer debt collection issues. The AAA said it would withdraw until some guidelines are established for the industry.
The decision comes just a few days after the National Arbitration Forum withdrew from the market for new cases in response to a lawsuit filed by the attorney general of Minnesota.
Both firms are private arbitration companies that are selected by lenders, including credit card and telecommunications companies, to resolve disputes involving consumer credit.
Consumers, for their part, are often unaware that mandatory arbitration clauses are included in the fine print of their contracts, which waive their right to bring the case to court.
Advocates of arbitration say the process is easier and less expensive then bringing a dispute before a judge in court.
However, many consumer advocates have raised concerns about potential bias in the process that favors companies. Figures quoted by the Wall Street Journal reveal that in 94 percent of disputes handled by an arbitration firm, the lender wins.
Now that the AAA and NAF – two of the biggest players – are out of the consumer arbitration market, how will disputes over credit card debt be handled?
According to the San Francisco Chronicle, the resolution is still up in the air. Spokeswoman for the American Bankers Association Carol Kaplan told the publication that the language in many consumer contracts may allow a different arbitration company to step in.
But others have raised concerns that debt collectors will not be able to find enough companies to handle all of the new cases that need to be resolved while the arbitration industry is in flux.
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