By Caroline E. Mayer
Washington Post Staff Writer
Thursday, February 24, 2005; Page E01
Beth Plowman, a Damascus international public health adviser, was
shocked when she discovered that a $27,240 arbitration judgment had
been levied against her for credit card charges incurred by an
identity thief who bought sporting goods all across Europe.
Plowman had been in the United States at the time and had no idea
about the charges: Someone claiming to be her sister had called the
credit card company and asked that all bills be sent to an address in
When she found out about the charges, Plowman began trying to get them
dismissed through the collection agency, not realizing that she also
needed to show up at the arbitration hearing. She lost the arbitration
and had to hire a lawyer to persuade the collection agency pursuing
her for the debt to drop its claim.
"I don't have a sister," Plowman said. "The fact that people are being
held to pay these debts through an arbitration process is just
While her experience may be unusual, consumer advocates and trial
lawyer associations say Plowman is an example of what can go wrong
when mandatory arbitration clauses are written into credit card
agreements. Longtime critics of such clauses, these groups say
mandatory arbitration is being used as an "offensive weapon" by credit
card companies seeking speedy resolution to disputes -- sometimes
without a consumer's full knowledge. The result, they say, is that
the arbitration process may saddle consumers with debts they may not
have incurred, as well as substantial arbitration costs, including the
credit card company's legal fees.
"Before consumers know it, an arbitrator has issued an award against
them, and the award can't be challenged on its merits" but only on
narrower grounds such as whether the arbitrator was impartial or
exceeded his or her power, said Steve Tripoli, consumer advocate for
National Consumer Law Center. The center just issued a paper on the
practice, citing four consumer cases including Plowman's. "The only
thing left for consumers to do is fight the collection" of the award,
which is usually hard to overturn once it has been issued, he
added. Most arbitration challengers are not as fortunate as Plowman,
Banking industry officials disagreed with the law center's findings.
The American Bankers Association called it a small set of cases that
doesn't prove consumers are harmed by arbitration. Spokeswoman Tracey
Mills said a more detailed study done for the association shows that
consumers who initiate arbitration cases benefit from the process.
Critics say that businesses are more likely to bring cases to arbitration
In the past decade, mandatory arbitration clauses have been appearing
in the fine print of many consumer agreements, including those for
credit cards, telephone service, car sales and even exterminator
services. These clauses require consumers to agree in advance to waive
their rights to a court hearing and refer all disputes to independent,
Businesses say arbitration is faster, more efficient and cheaper than
Its critics, however, say mandatory arbitration is a way to protect
firms from large jury verdicts and class-action lawsuits. They add
that the process itself often stacks the deck against the individual
since the cases permit less evidence-gathering than in trials and can
be appealed only on narrow grounds.
Consumer groups, smarting from their failure last week to block
passage of a law that will limit class-action lawsuits, now plan to
launch a campaign to get rid of mandatory arbitration provisions. A
coalition of consumer advocates, civil and employment rights groups
and attorney associations plans to unveil a Web site today listing
companies that do not require consumers to commit to arbitration in
The coalition will also press for congressional action, noting that
Congress has already passed a law barring car manufacturers from
imposing mandatory arbitration on their dealers, although dealers can
include such provisions in their consumer contracts.
Paul Bland, staff attorney for Trial Lawyers for Public Justice, said
it is unclear how many consumers may have unknowingly had arbitration
decisions issued against them seeking repayment of debt. "However, he
said, "in the last six months, we have received scores of phone calls
from consumers who want us to represent them challenging collection
MBNA, which issued Plowman's credit card, declined to discuss the
specific case but said it is confident that the arbitration awards
have been granted appropriately. "In fact, several of the awards were
upheld in the courts," said the company's general counsel, former FBI
director Louis J. Freeh, in a statement. "Trial lawyers have long
opposed this straightforward process [of arbitration] since it
generally precludes them from litigating," Freeh said.
Edward Anderson, the head of the National Arbitration Forum, the
nation's largest arbitration firm, which handles as many as 50,000
cases a year, said consumers "get more notice in arbitration than they
ever do in the court."
"In our system, if you don't respond, we send out two notices; in the
courts you get one notice."
Banks, he added, cannot collect the money awarded in arbitration
decisions unless the awards are confirmed by a judge.
Plowman considers herself one of the luckier consumers. She declined
to participate in the arbitration proceeding because she had been
contacted by a debt collection agency and believed the problem would
be corrected once the credit agency realized she was an identity theft
In August 2003, the arbitrator issued a $27,240 award against her. She
subsequently hired an attorney who helped convince the collection
agency that the charges were not hers. The agency dropped its claim,
but only after Plowman paid $2,200 in legal fees.
Copyright 2005 The Washington Post Company
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[TELECOM Digest Editor's Note: What I do not understand, is who put
in the fix with the 'arbitrator'? Was it the credit card company or
the collection agency or ...? How could the credit card company ever
have reached a decision that the person was responsible for the fraud?