ConsumerWatch

Credit Card Arbitration May Be A 'Stacked Deck'

SAN FRANCISCO (CBS 5) ― Anastasiya Komarova never had a credit card with MBNA, but National Credit Acceptance, a collection agency, says she did and that she owed them $7,000.

"There was apparently another woman with a similar name who was an authorized user of an MBNA card," said Anastasiya. But the collection agency refused to believe her.

"I was receiving threatening phone calls at work," she said.

She refused to pay. The collections agency took her to arbitration, but didn't let her know that she had a hearing.

"They told me that it went before a judge and there was a judgment against me and I was guilty by default by not showing up to the arbitration," said Anastasiya.

San Francisco City Attorney Dennis Herrera is currently suing the National Arbitration Forum (NAF) for its unfair business practices.

"It's a sham," said Herrera.

"They (NAF) are the largest provider of arbitration services in the country," said Herrera.

While consumers may not know it, within the fine print in credit card applications there is a section that the consumer agrees to take any billing disputes to arbitration rather than go to court.

In arbitration, the two parties agree to have their dispute heard by an arbitrator, someone that is separate from the judicial system. However, the two parties are then bound by that individual's decision.

Herrera warns that most consumers do not know what they are agreeing to. "They could be referred to an arbitration system which is stacked against them," he said.

Critics and even former arbitrators say decisions are some times made in minutes, with little information and often without debtor involvement.

"Through their own materials NAF has demonstrated they've conducted close to 20,000 arbitrations here in the state of California and of those, only 30 have resulted in a judgment in favor of a consumer" said Herrera.

Thirty out of nearly 20,000 cases and Anastasiya wasn't one of them. In fact, more fees were added onto that $7,000 that she was accused of owing.

"Instead of $7,000 now I owed $11,000. To me that was just another proof that this whole thing was just a scam," she said.

The pressure to pay heated up. The collection agency called her at work constantly. They threatened to take her savings or carry a judgment against her husband's business. Anastasiya likened these threats to "high school bullies."

So, Anastasiya hired an attorney and took the collection agency to court.

"The trial was done the way I expected it to be done in the United States, I had a jury and a judge who actually cared what I had to say and then we won," she said.

Fortunately, for Anastayia the process worked -- something City Attorney Herrera hopes works for all the consumers of California.

"The most important thing is that we make sure that business practices are reformed so that we really have an arbitration system utilized by NAF which is fair and equitable" said Herrera.

To read the official documents related to City Attorney Herrera's case. please click on the "related links" to the right of this story.

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