Many credit card companies require debtors to participate in arbitration - thereby avoiding class action lawsuits. However, are debtors really getting fair treatment during that process? The answer is no according to one consumer advocate.

Bud Hibbs

Bud Hibbs, a debt collection consumer advocate and consultant for over 25 years who has written several books, is approved to teach CLE courses through the State Bar of Texas and has appeared in numerous radio and television programs including the Oprah Winfrey Show, says that arbitration is an area that most people don't understand. He explained:

Years ago, you and I could have met in a coffee shop and you could have said to me, 'Bud, you're in the financial business. Well, you know, I think one of the banks is really screwing me on this interest rate and my friends that I work with, the people I worship with, and my neighbor, we all get together, we hire a lawyer and sue this bank under class action statutes.'

Similarities to current Wall Street situation

Hibbs says that to get around [having class actions filed], the banks instituted arbitration whereby you and I and the credit card holder can only sit down one on one. He told us that what's going on in arbitration is very similar to what's going on on Wall Street right now. He continued:

You have a few people that control all the puppet strings that handle arbitration; you have a couple of law firms that have pretty much sandwiched it in where they have complete control over the credit card industry. It's very well known in the industry that the people who actually do the arbitration, these are usually retired lawyers and judges or lawyers that are looking to make more money than they can practicing law, which is about a minimum of about $300 per case, and they can handle two or three cases a day.

Rubber stamping approvals and lying on forms

Unfortunately, Hibbs says, there are people are out there that are just rubber-stamping approvals and lying on forms. He explained, "The national approval rate for the National Arbitration Forum out of Minneapolis is 97 percent and they tack on a 20 percent back in for attorney's fees, so it's pretty lucrative money and most people don't understand it and don't know how to fight it. A lot of attorneys don't understand it or how to fight it either. Right now, it is literally running wild in our country where lawyers are lying on forms. They all say, 'Under penalty of perjury, I declare this information to be true', when they don't have any idea if it's true or not; but every day they churn out hundreds and hundreds of these deals, which are automatically converted to awards that end up putting money in their pocket."

Taking action

To prove his point, Hibbs referenced a case in which the State of California filed a class action lawsuit against them several months ago. It's called, The People of the State of California v. The National Arbitration Forum and says that he hopes to God that these judges are smart enough to see what's going on and compare it to what's happening on Wall Street right now.

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