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.