What Does an Order from a Debt Collector to Dismiss from Arbitration Council Mean?

The Federal Trade Commission administers the Fair Debt Collection Practices Act, which is codified in Title 15 of the United States Code. Although the act prohibits abusive collection efforts and deceptive practices by debt collectors, it does not govern arbitration proceedings. Instead, debt collectors and debtors are subject to the applicable arbitration rules under state laws or under the Federal Arbitration Act.

Mandatory Arbitration

Debt collectors can begin arbitration proceedings against debtors without first obtaining permission from them in some circumstances. If a debtor's original contract with his creditor or credit card company includes an arbitration provision, he is subject to binding arbitration as a condition of receiving his loan or credit card. Creditors commonly insert binding arbitration provisions since they can be less expensive and time-consuming.

Motion to Dismiss During Arbitration

Collection agencies can file motions to dismiss during the pending arbitration proceedings pursuant to the Federal Arbitration Act. However, debtors have a legal right to demand arbitration by petitioning a U.S. district court to order arbitration under Title 28 of the United States Code. If the underlying contract requires the parties to submit to mandatory arbitration proceedings, the federal court must stay the arbitration proceeding in accordance with the credit agreement until the arbitrator issues a final award.

Motion to Dismiss After Arbitration

Debt collectors can file motions to dismiss during arbitration or after arbitrators issue their decisions. A debt collector can file a "motion to vacate" an arbitrator's award based on procedural defects or the abuse of discretion in federal court. Pursuant to the Federal Rules of Civil Procedure and Federal Arbitration Act, federal judges can dismiss arbitration awards if the moving parties filed their motions to vacate within the statutory time limits. A motion to vacate must be filed and served within three months of an arbitrator's award, and attorneys for debt collectors have three months to request a modification or notice to vacate. Under the Federal Arbitration Act, federal district courts can vacate or dismiss awards obtained by fraud or those based on partial arbitrators' decisions.