How Arbitration Works in Credit Card Debt Lawsuits

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If you’re being sued over credit card debt, you may have heard about forcing the case into arbitration. But what does that really mean, and does it help? The short answer: arbitration can change where your case is handled, but it doesn’t erase the debt and an arbitrator decides the case rather than a judge. The fees may also be substantially more.

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What Is Arbitration?

Arbitration is a private way to resolve disputes outside the traditional courtroom. Credit card companies often include arbitration clauses in their agreements. These clauses allow them—or you—to request that a legal dispute be handled by a neutral third party, known as an arbitrator, rather than a judge.

For consumers, this typically happens under the rules of the American Arbitration Association (AAA) or similar groups. These rules often apply when the agreement involves non-negotiable consumer terms, like credit cards or auto loans.

Can You Move a Lawsuit to Arbitration?

Yes—you can file a motion to compel arbitration if the credit card agreement includes an arbitration clause. If granted, the court doesn’t dismiss the case outright. Instead, the lawsuit is abated, meaning it’s put on hold while the dispute is resolved through arbitration.

You’re not off the hook. The case isn’t over—it’s just shifting venues.

What Happens After Arbitration Is Compelled?

Once arbitration is compelled:

Court proceedings pause. The case is generally not dismissed but is instead abated to allow for the arbitration to proceed.
The case is submitted to an arbitration provider (usually AAA). The filing fees and arbitrator fees can be substantial.
The parties go through arbitration, which includes filing a demand, describing the dispute, and possibly attending a hearing.
The arbitrator issues a ruling, which can include a financial judgment.
That arbitration award can be confirmed in court and enforced like a regular judgment.

Does Arbitration Make the Debt Go Away?

No. Winning a motion to compel arbitration does not eliminate the debt. If you owe the money, you still owe it—even if the case is moved out of court. Arbitration is just a different process for resolving the dispute. In some cases, it may be more favorable to the consumer because the creditor might be less willing to pursue arbitration due to the cost or complexity, but that’s not guaranteed.

Bottom Line

Compelling a credit card lawsuit into arbitration can change the path of the case, but not its outcome. The fees can also be substantially more expensive. Additionally, you still owe the debt if the arbitrator rules against you, and arbitration doesn’t erase that obligation. However, knowing your rights and understanding the arbitration process may offer strategic benefits when facing collection lawsuits.

Mike Weston, Esq.

Mike Weston is a seasoned debt lawsuit defense attorney and founder of Weston Legal. Since 2005, Mike has devoted his career to compassionately helping consumers struggling with issues involving their personal and business debts. Mike is grateful to have been able to help tens of thousands of clients become empowered with knowledge on the path to financial stability.