It's a troubling union of two anti-consumer practices that have already sparked vigorous protest: out-of-control debt collection tactics plus often-hidden clauses in contracts that nullify consumers' constitutional rights to trial by jury and a day in court.

Now, at least two giant credit-card issuers and one of the nation's largest firms arbitrating their consumer disputes have combined these practices in a disturbing new way: They're using binding, mandatory arbitration primarily as an offensive weapon, by fast-tracking disputes over credit-card debt into rapid arbitration. A number of consumers charge that the banks often do this with little notice, after long periods of dormancy for the alleged debt or over consumers' specific objections -- then force those who don't respond swiftly or adequately into default. The arbitrator often forces the consumer to also pay for the hefty arbitration costs and the card issuer's attorney, making the total tab for consumers several times the original amount owed and many times what it would have been in more traditional debt settlements. So it's a neat pathway to turbo-charged profits for both the card issuer and the arbitrator.

The practice, based on industry data disclosed in several lawsuits, appears to affect tens of thousands of consumers. What's worse, it doesn't seem to matter that it is widely forcing victims of credit-card fraud to pay debts they clearly don't owe, or that the boilerplate language of mandatory arbitration clauses deprives those same victims of one of their most basic legal rights. That's because arbitration by definition says a consumer can't go to court to have his or her story heard, even if the alleged "debt" is a result of someone else's criminal fraud and in no way a result of the dunned consumer's actions!

Who's behind this new anti-consumer onslaught? One consumer lawyer who's been tracking the trend, Paul Bland of Trial Lawyers for Public Justice, says that "certain corporate lenders, most prominently MBNA and First USA Bank, are using arbitration with the National Arbitration Forum as a way of pursuing large numbers of claims against consumers." Bland says that NAF's operation "is geared toward rapidly churning consumers through an industry- friendly process," where "arbitration awards are regularly entered by NAF against consumers who probably did not even understand that they were defendants in a legal proceeding demanding money from them. And NAF's process often greatly increases the amounts consumers are deemed to owe."

"These are smart people who find themselves in situations where they feel blind-sided," says TLPJ's Leslie Bailey, who researched many of the cases. Bailey says the process "really moves quickly, without giving consumers a chance to have a proverbial horse in the race. There's a feeling that what's at stake is never expressed to them before they suddenly find themselves in default," and saddled with large costs.

Bland says NAF's executive director has testified that the firm handles about 50,000 arbitrations of debt collection cases each year. According to documents produced in one lawsuit by NAF itself (see exhibits with the full report) the consumer prevailed in just 87 out of 19,705 arbitrations NAF shepherded to an outcome. So NAF's client in this example, First USA Bank, prevailed a disturbing 99.56 percent of the time!

"Only a tiny percentage of consumers read the terms of credit card agreements, which are typically sent out as bill stuffers (statements stuffed in with monthly bills), printed in tiny font and filled with dense legal jargon" that's often incomprehensible even to highly-educated consumers, Bland says. "And very few consumers understand that they've supposedly given up their constitutional rights and agreed that the NAF is the sole forum for any legal claims they may have involving their bank. So when consumers receive notices from or about the NAF, they often believe these are junk mail or some mistake and throw them away."

National Consumer Law Center advocates have written extensively about the gross unfairness of both abusive debt-collection practices and so-called mandatory arbitration clauses in consumer contracts. Broad outlines of the issues involved can be found on NCLC's Web site at these two links: http://www.consumerlaw.org/initiatives/model/arbitration.shtml and http://www.consumerlaw.org/initiatives/debt_collection/press_release.shtml

Bland says this new wave of problems "is all consistent with NAF's documented practice of advertising to corporations to the effect that its rules are slanted in their favor. NAF promises corporations that unlike other arbitration firms it bans class actions, that it permits 'little or no discovery' (in arbitration proceedings), that it has a loser-pays rule that requires any non-prevailing consumer to pay the corporation's attorneys' fees, that it lets corporations avoid 'the risk' of a jury, and that it 'will improve 1/8their 3/8 bottom line.' " It's a clear conflict-of- interests: NAF reaps millions in business directed to it by credit-card companies while NAF sees most consumers just once, an easy temptation to what critics refer to as "repeat player bias" toward big customers.