How to File a Motion to Compel Arbitration in Debt Lawsuits

You just got served with a debt collection lawsuit. Going to court sounds terrifying. But you have another option: arbitration.

Many debt cases can be resolved through arbitration instead of court. Arbitration is less intimidating and often more favorable for defendants. Most debt collectors would rather dismiss your case than pay for arbitration.

Here’s how to make it happen.

What Is Debt Collection Arbitration?

Arbitration is a private dispute resolution process outside of court. Both parties agree to let a neutral third party decide the case. That person is called an arbitrator.

Arbitrators apply the law like judges do. They take oaths of fairness and impartiality. But unlike judges, the disputing parties handpick arbitrators. Judges are appointed or elected by government officials.

Many credit card agreements and loan contracts contain arbitration clauses. State and federal laws allow you to enforce these clauses. You just need a valid arbitration agreement in your contract.

Possible Outcomes of Filing a Motion to Compel Arbitration

When you file a motion to compel arbitration, three things can happen:

• The court grants your motion and orders arbitration
• The debt collector dismisses the lawsuit to avoid arbitration costs
• The court denies your motion and the lawsuit continues

The second outcome is most common. Arbitration fees often exceed the debt amount being collected.

How to File a Motion to Compel Arbitration

Ready to file? Follow these four steps carefully.

1. Draft Your Petition to Compel Arbitration

According to Section 4 of the Federal Arbitration Act, you can file without waiting. Your petition should include:

• Sufficient background facts about your case
• Complete text of your arbitration agreement
• Identification of all lawsuit parties
• Proof of the court’s jurisdiction
• Your request for an arbitration order
• Your signature

Title your document “Petition to Compel Arbitration.” Keep your facts clear and concise.

2. File Your Petition With the Court

Contact the court clerk about filing requirements. File your original petition along with a notice of hearing. The hearing notice should be scheduled within five days.

Pay any required filing fees. Ask about fee waivers if you cannot afford them.

3. Serve the Other Party

You must properly serve the debt collector with these documents:

• Copy of your petition
• Notice of hearing
• Summons

Follow your state’s rules for service of process. Improper service can delay your case or get your motion dismissed.

4. Attend Your Hearing

The judge will review your arbitration agreement. They’ll decide if it’s valid and covers your dispute. If no issues exist, the judge will issue an arbitration order.

Bring copies of all relevant documents. Be prepared to explain why arbitration applies to your case.

Need help responding to a debt lawsuit? Our partner Solo can guide you through the process.

Should You File a Motion to Compel Arbitration?

Not every debt lawsuit is eligible for arbitration. Consider these factors first.

1. Check Your Arbitration Agreement

Review your original contract carefully. Look for an arbitration clause in your credit card agreement or loan documents. Without a valid arbitration clause, you cannot compel arbitration.

Arbitration provisions bind both parties to resolve disputes through arbitration. The clause typically specifies the arbitration location and tribunal. It requires courts to confirm any arbitration award.

Make sure your dispute falls within the agreement’s scope. Some agreements exclude certain types of disputes. A contract might require arbitration for payment disputes but not fraud claims.

You can search for credit card agreements at the Consumer Financial Protection Bureau.

2. Determine the Arbitration Location

Your arbitration provision will specify where arbitration occurs. Location matters because it affects convenience and cost. Some agreements require arbitration in a specific city or state.

3. Choose Between State and Federal Court

Decide whether to file in state or federal court. The Federal Arbitration Act applies in both venues. But federal courts tend to rule more favorably toward arbitration.

Federal courts have a strong policy of enforcing arbitration agreements. State courts may be more unpredictable.

Credit Card Arbitration Explained

Credit card companies sue thousands of people every year. You can use arbitration to move your case out of court.

All credit card agreements contain arbitration clauses. Review yours carefully before deciding. The clause explains who pays fees, where arbitration occurs, and what disputes are covered.

Many credit card arbitration clauses favor consumers. They often require the credit card company to pay all fees. When arbitration costs exceed the debt amount, companies typically dismiss the lawsuit.

Arbitration vs. Lawsuit: Key Differences

Court lawsuits stress most people out. Arbitration offers a less intimidating alternative. The process is private and informal compared to court.

In court, you face a judge in a formal courtroom setting. Court proceedings are public record. Anyone can attend and review documents.

In arbitration, you meet with an arbitrator in a private office. The process remains confidential. Only the parties involved attend the hearing.

Most debt collectors prefer to dismiss cases rather than go to arbitration. The cost often exceeds what they’re trying to collect.

Arbitration vs. Mediation: What’s the Difference?

People often confuse arbitration with mediation. They’re both alternative dispute resolution methods, but they work differently.

In arbitration, the arbitrator makes a binding decision. Both parties must follow that decision. The arbitrator reviews evidence, hears arguments, and issues an award. The award is final and enforceable in court.

In mediation, the mediator cannot force a decision. The mediator helps parties negotiate and reach agreement. If mediation fails, the case goes back to court.

Arbitration is more formal than mediation. It follows legal rules and procedures. Mediation is flexible and conversational.

Key Characteristics of Arbitration

Understanding arbitration helps you decide if it’s right for your case.

1. Confidentiality

Arbitration proceedings remain private. Submissions, evidence, and awards are not public record. Only the parties involved know what happens.

2. Finality

The arbitrator’s decision is final. Both parties agree to accept and follow the decision. You cannot appeal an arbitration award except in rare circumstances.

3. Neutrality

Both parties ensure neutrality by:

• Selecting an arbitrator of neutral nationality
• Choosing applicable laws based on both parties’ locations
• Selecting a language convenient for both parties
• Choosing an appropriate arbitration venue

These mutual decisions prevent either party from having an unfair advantage.

4. Consensus

Arbitration only happens when both parties agree to it. The agreement usually comes from an arbitration clause in the original contract. Unlike mediation, you cannot withdraw from arbitration once it starts.

Major Arbitration Organizations: JAMS and AAA

Two organizations dominate debt arbitration in America: JAMS Solutions and the American Arbitration Association (AAA). Your arbitration will likely involve one of them.

According to JAMS, the arbitration process works like this:

Both parties select an impartial arbitrator. The arbitrator reads briefs and examines evidence. They listen to testimonies from both sides. Then they issue an “award” that includes any relief, damages, or costs.

The arbitrator must render the award within 30 days of the hearing. After court confirmation, the award becomes a legal judgment.

Who Pays Arbitration Costs in Debt Lawsuits?

Cost is a critical factor in arbitration. Many debt collectors dismiss cases to avoid these costs.

In many credit agreements, the creditor pays all arbitration fees. These fees can exceed the debt amount being collected. When that happens, debt collectors typically dismiss the lawsuit.

If your agreement doesn’t specify who pays, both parties split the cost by default. Case dismissal becomes less likely in these situations.

Some agreements let creditors recover arbitration fees if they win. Read your credit agreement carefully to understand the fee structure.

In employer-employee arbitrations, employers must cover costs. They can recover fees if they win.

JAMS and AAA Filing Fees

Arbitration costs vary based on claim amount and organization. Here’s a breakdown:

JAMS Filing Fees:

• Claims under $10,000: $250 consumer filing fee
• Claims $10,000-$25,000: $400 consumer filing fee
• Claims $25,000-$75,000: $750 consumer filing fee
• Business filing fees range from $1,500 to $10,000

AAA Filing Fees:

• Claims under $10,000: $200 consumer filing fee
• Claims $10,000-$75,000: $300 consumer filing fee
• Claims over $75,000: $750 consumer filing fee
• Business filing fees range from $1,075 to $3,350

These fees don’t include arbitrator compensation or administrative costs. Total arbitration costs often reach thousands of dollars.

Preparing for Your Arbitration Hearing

Once the court grants your motion, prepare thoroughly for arbitration. Gather all relevant documents and evidence. Review your credit agreement and payment history.

Organize your evidence chronologically. Prepare a clear timeline of events. Practice explaining your side of the dispute.

The arbitrator will review briefs from both sides. They’ll examine documentary evidence and hear testimonies. Be ready to answer questions about your account and payments.

Consider whether you need legal representation. Our partner Solo can help you navigate the arbitration process and build a strong defense.

When Arbitration May Not Be Your Best Option

Arbitration isn’t always the right choice. Sometimes defending the lawsuit in court makes more sense.

If your arbitration agreement requires you to pay half the fees, arbitration may cost too much. If the debt collector has weak evidence, you might win in court.

If you have strong defenses like statute of limitations or mistaken identity, court may be better. Judges can dismiss cases on these grounds before trial.

Consider consulting with an attorney about your options. They can review your case and recommend the best strategy.