Understanding Arbitration in Your Arizona Debt Collection Lawsuit

Many have heard of arbitration but aren’t quite sure what it is. In Arizona, we have a unique procedure in debt collection lawsuits that requires the parties to the lawsuit to attend what is known as “compulsory arbitration” if the amount that is being sued for is less than $50,000 and the case is filed in the Arizona Superior Court.

To fully understand this it is important to go over how the courts are set up here in Arizona.

Arizona Justice Courts

First, there is the Justice Court.  This is where most of the debt buyer cases (i.e. Midland Funding, Portfolio Recovery, CACH, LLC) are filed.  Justice Courts in Arizona deal with civil debt collection lawsuits where the amount in dispute is less than $10,000.  These courts also have an elected Justice of the Peace rather than an appointed judge.  Arbitration is not part of the court process in debt collection cases in Justice Court in Arizona.

Superior Court in Arizona

For debt collection cases where the amount in dispute is more than $10,000 the creditor is required to file the lawsuit in the Superior Court.  Further, when the amount in dispute is less than $50,000 (which it is in most debt buyer cases), the parties have to participate in “compulsory arbitration”.

Compulsory arbitration is somewhat different than a regular trial.  It is sort of like a trial in a conference room without a judge.  In Arizona an arbitrator is appointed who is a member of the State Bar; usually an attorney with at least five (5) years of experience.  One strange thing about compulsory arbitration is that there is no guarantee that the attorney who is appointed as the arbitrator will have any background at all in debt collection law.  We could very easily get an attorney who has never been in a courtroom and spent their entire career drafting wills and trusts.

Also, the Rules of Evidence are somewhat different in arbitration in that it is somewhat relaxed.  Generally, this is not good for debt collection cases.  These types of cases are pretty intensive when it comes to documents and testimony, and if just anything can come in, it harms your case.

Because of that, in Arizona compulsory arbitration is not binding.  This means that if you lose at arbitration that you can have the Superior Court Judge set the case for trial and decide it then.

One other thing…in Arizona the average time from the Complaint being filed to trial is…wait for it…24 months!  Two full years!

The good news/bad news is that debt collection lawsuits usually only take about a year.