The Fine Print: Don’t Let Arbitration Delay Your Wedding

consumer arbitration cost The following is not legal advice. Please contact Alexander Bachuwa, a New York attorney, if you have a consumer arbitration question or claim.

Did a bank charge you an overdraft fee? Did the bank subsequently charge you late fees then report you to collections for nonpayment? Was your credit ruined as a result? If so, you may be entitled to monetary relief.

While this sounds like a Better Call Saul legal advertisement, this problem is not something out of a Hollywood script. Indeed, it is far too common. Cue in the sad case of Daniel Dempsey, a consumer who chose to fight Citibank and paid dearly in his quest for justice.

“[Dempsey] estimates that he spent about $100,000 so far in arbitrating his case with Citibank, a sum that has caused him and his fiancée, to delay their wedding.”

Per a CBS Money Watch article, One Man’s $100,000 Journey through Arbitration, Daniel Dempsey had a dispute with Citibank regarding an overdrawn account which led to late fees which led to derogatory marks on his credit report which led to a massive hit to his credit score.

Understandably upset, Dempsey pursued an action against Citibank in small claims court. Citibank moved the matter to arbitration. And that was where things went terribly awry.

“The moment they see cost, the amount it would take, the hours they would have to take off from work, a lot of people would give up at that point.” Amanda Werner of Americans for Financial Reform, a nonprofit that advocates for financial reform.

With the assistance of competent counsel who has a thorough understanding of consumer arbitration, a client can avoid the pitfalls cited by Werner. To initiate the arbitration process, an attorney can advance the nominal filing fee on behalf of his client. After the claim is filed, the substantial costs of the arbitration are borne by the corporate respondent. From there, the client is consulted about developments without having to be directly involved. The outstanding variable that must be addressed is the cost of hiring an attorney.

“Dempsey hired legal counsel as well as expert witnesses, who he said charged between $200 to $300 an hour. Every time [Dempsey] paid another $5,000 for costs related to his arbitration with Citibank, he thought it would be his last.”

Although the specific facts of this case are not described in full detail, it is very easy to avoid spending $1,000 let alone $100,000 on such claims. To begin, clients should not hire an attorney on an hourly basis for routine consumer arbitration claims. This is particularly true for Dempsey’s claim which falls under the Fair Credit Reporting Act (FCRA), a federal law enacted to ensure that information reported in a consumer’s credit report is accurate. The Act has a fee-shifting provision whereby attorneys are compensated by the opposition if they succeed in proving that a violation has occurred. For an FCRA based arbitration claim, clients should insist on a contingency fee agreement in which the attorney is only compensated if the case settles or if the claimant prevails in arbitration.

In addition, claimants should avoid hiring experts unless it is absolutely necessary. In consumer arbitration, each side is responsible for the costs of retaining its own experts. A lawyer well versed in consumer protection law should understand that the FCRA has a whole host of remedies for an injured client, something that can be proven without the services of an expert witness.

“Dempsey said he believes he’s likely to face thousands more in legal fees because as [sic] the case is moving into round two. It’s time stolen from my family, my businesses. And I don’t get compensated for it.”

Dempsey prevailed in the initial arbitration proceeding and was awarded punitive damages for the willful misconduct of Citibank. The satisfaction of the victory was short-lived. Per the terms of the arbitration agreement, Citibank appealed the matter and Dempsey will have to start the process anew while enduring the same challenges as before.

“The original amount of the dispute? Less than $150 in fees.”

Dempsey’s story is a cautionary tale for those that are wronged by big companies and choose to fight back. Although his effort is commendable, his strategy was flawed. Instead of spending tens of thousands of dollars on attorneys and experts, Dempsey would have been better off heeding this advice: Do file a consumer arbitration claim regardless of the dollar amount to battle corporate mischief. Do not hire an attorney who will charge on an hourly basis. Do appeal the claim even if it takes months to ensure a just outcome. Do not delay a wedding by spending $100,000 in order to reach the same result.

 

Last updated on February 7th, 2017

About Alex Bachuwa

Alexander Bachuwa is a New York attorney who focuses on consumer protection. He is also a BoardingArea blogger. Contact Alex at through his website at bachuwalaw.com and visit thepointsoflife.com

More articles by Alex Bachuwa »

25
Leave a Reply

avatar
15 Comment threads
10 Thread replies
0 Followers
 
Most reacted comment
Hottest comment thread
11 Comment authors
The Fine Print: Beating Citi in Arbitration, What It Means for You - Frequent MilerThe Fine Print: The Consumer Strikes Back - Frequent MilerAlex BachuwaDanNinjaX Recent comment authors

This site uses Akismet to reduce spam. Learn how your comment data is processed.

  Subscribe  
Notify of
Credit
Guest
Credit

I have a baggage claim with am airline, filed the paperwork on time, have the paperwork with me, but they are dragging the process. Already a 3 months now.

Is there an agency i can file a complaint with before going to small claims.

BC
Guest
BC

I think the moral of the story is that some people will go to unreal lengths to prove that they’re right.

Unreal.

Sexy_Kitten7
Guest
Sexy_Kitten7

Great article Alex!

1) Why would Citi push for arb instead of SCC? They hire outside counsel either way so it doesn’t save any money, right? More favorable judge i suppose? And why/how can they change venue? Did the T&C require arb? Many give you the choice.

2) I was under the impression that you have extremely limited rights to appeal for arb. Are you suggesting that consumers and banks can appeal any case they want? Arb is meant to be binding!

John
Guest
John

And I thought the new writer at DOC was bad

stvr
Guest
stvr

This was an incredibly confusing way to frame your point. I liked this article, but you could have led with “I read a story in the paper, and here’s what this guy did wrong.” Dare I say your writing is elliptical.

trackback

[…] specialist Alex Bachuwa shares his take on a story this week about a man whose wedding has been delayed due to the costs of arbitra…. Clearly, that man hasn’t been following Alex’s posts — but you should be so you […]

trackback

[…] The Fine Print: Don’t Let Arbitration Delay Your Wedding by Frequent Miler. Another great post in this series. […]

Steve
Guest
Steve

I guess you don’t follow fatwallet at all, because Dans fight against Citibank has been documented for many years now over in the finance forum, and in much more detail than the articles that have been published. It might give you better insight into why things have unfolded the way it has, and you might find yourself less inclined to criticize him on filing in small claims court and spending so much money on this if you knew the entire backstory. This whole thing started over a mistake on Citi’s part and their refusal to fix it, and it’s not like Dan went into this thinking it would drag on for this long, or be so costly. To publish an article titled don’t let arbitration delay your wedding…just wow, it clearly shows you don’t know so many of the details behind this case.

doubtful
Guest
doubtful

Dempsey’s ordeal with Citibank is described in more detail in a 6-part series on FWF, here’s part 6 — https://www.fatwallet.com/forums/finance/1527451. I sure hope Alex reviewed at least some of that before posting this article. Specifically, Citibank did not have the right to move the matter to arbitration, because it explicitly violated the arbitration rules.

NinjaX
Guest
NinjaX

nice. you da man. your last name looks like Back-U-Up… haha…

Dan
Guest
Dan

This is Dan. My case is difficult to unpack in any short form piece, especially without all of the details. I appreciate the coverage but want to make a few clarifications.

“Citibank, as is its right, moved the matter to arbitration.”

This is incorrect. Under the AAA and JAMS consumer rules, Citibank waived any right to remove a small claim to arbitration and still access those forums. The fact that Citibank was still allowed to force my small claim into arbitration isn’t so much a flaw in my strategy as a flaw in the AAA’s process. If the arbitrator had punted back to court for a AAA rule violation (as he should have), we’d have had a jury trial.

I’ve written about this on Medium on FW extensively. I will probably do a big rewrite when I get some time.

We were looking forwarding to re-arguing arbitrability to the three-arbitrator appeal panel. We have also explored appealing to court on the basis of the arbitrator’s blatant disregard of the arbitration agreement, among other things. (The AAA and JAMS rules are a part of the agreement.)

The bottom line is the small claims carve out is not supposed to be controversial. Even the pro-arbitration legal scholars I’ve spoken to are shocked when they hear my case. After all, if we’re to have a private civil justice system, the rules must mean something.

“To begin, clients should not hire an attorney on an hourly basis for routine consumer arbitration claims.”

I agree. However, finding a contingency fee attorney to go to arbitration is not automatic. Many lawyers run for the door as soon as they see there’s an arbitration agreement.

In court, I self-represented until arbitration was unavoidable. Then I hired an hourly attorney to make the arbitrability arguments to the arbitrator. Our MSJ was denied without a reason being given (which was a surprise). Then I hired consumer attorneys 90 miles away under a different arrangement. (Well, there’s a story in between those two but it’s irrelevant to this response.)

I also agree that expert witnesses should be avoided if it all possible. $15,000 of my costs were on two expert witnesses: a banking expert and a credit damage expert. However, they were unavoidable given the accrued expenses involved. When you’re fighting Big Law and a Big Bank, you need all the reinforcements you can get. You don’t want to lose and be saddled with Citibank’s million dollar legal bill because you cheaped out on experts.

For the record, our claims were breach of contract, fraud, consumer fraud, and FCRA.

trackback

[…] weeks ago I wrote an article called Don’t Let Arbitration Delay Your Wedding. The purpose of the article was to caution would-be claimants about the pitfalls of the arbitration […]

trackback

[…] my client won the case and received his $200, the question is whether this is a victory worth celebrating. To some extent, the answer is yes. My client and I were able to take on a corporate giant, present […]