Debt Collectors Using Forced Arbitration Clauses to Block Consumers’ Legal Action

Originally published by Robert Kraft.

The New York Times reports on the growing trend of debt collectors using forced arbitration to block any potential lawsuit, even if the collector acted illegally. The article highlights one example involving Midland Funding, a unit of Encore Capital Group, who sued Maryland residents despite Encore not being licensed to collect debt in Maryland. The article suggests that “Encore and rival debt buyers are using the courts to sue consumers and collect debt, then preventing those same consumers from using the courts to challenge the companies’ tactics.” One consumer’s lawyer argued that “by going to court… Encore waived its right to compel arbitration,” but a Mississippi judge remained unpersuaded and “ruled that Encore’s lawsuit to collect the debt was separate from” the “case accusing the company of violating the law.” The article concludes that “such decisions are leading lawyers to believe they may have found, in the words of one law firm, the “silver bullet” for killing off legal challenges.”

From the news release of the American Association for Justice.

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