The term "arbitration" refers to a method of dispute resolution
involving a neutral third party. In contrast, the term "mediator" refers to
someone who merely tries to help two disputing parties reach a mutually
agreeable solution. So what's the difference? Arbitration is legally
binding while mediation is not!
Arbitration is becoming very popular as a means to resolve debt
disputes without the high costs associated with court battles. One area where
arbitration has become extremely popular is car sales. Many automobile dealers
ask you to sign an "arbitration agreement" so that in the case of any dispute
concerning your purchase and warranty issues (especially expensive maintenance)
you cannot use the court system to seek compensation. Instead, you must use an
arbitrator and usually one selected by the car dealer.
When it comes to credit cards, loans, mortgages and many other
credit-related issues, arbitration is now written into the credit contract as
the primary means of resolution. Read the fine print carefully BEFORE signing
any contract that requires arbitration because these contracts always favor the
creditor!
However, when it comes to settling debts, arbitration can work
in your favor. Whenever a debt dispute arises and court action is threatened,
look over your credit contract carefully; you might be entitled to arbitration.
If you end up in court but have made "good faith" efforts to
pay your debts and have records to prove your actions, ask the judge to send
the case to arbitration based on your willingness to cooperate and to resolve
the issue and on the collector's unwillingness to work with you. Some judges
may be inclined to send the case to arbitration when debtors demonstrate a
willingness to pay but cannot meet the collector's demands.