In the world of collections, we should adopt the same slogan used in the world of medicine: primum non nocere.I just know that we all recognize this phrase as the Hippocratic Oath– “first,do no harm.” Why do I mention this? Well, first, I think it is cool that with the help of Google©, I can translate Latin (originally Greek) into English. Second, and the real reason, is that in the collection context when collecting accounts from those debtors who are not paying, we do not want to add insult to injury by being sued or countersued by a disgruntled customer. So, let’s focus attention on reducing this risk.
Many years ago, creditors turned to the Federal Arbitration Act (FAA) to add pre-dispute arbitration language to their promissory notes and installment sales contracts. This strategy proved to be a success in defending against phony claims being brought as both a sword and shield by aggressive plaintiff’s attorneys on behalf of their debtor clients. The fight to establish pre-dispute arbitration as binding in both individual claims and class claims went through years of litigation before finally and firmly taking hold.
However, pre-dispute arbitration under the FAA remains subject to loss if the law is changed. At various times over the last 20 years, amendments to that law to remove consumer transactions from its application have surfaced.
So, what is a “fall back” position if the FAA no longer applies to consumer finance, or if a consumer finance company for any reason chooses not to include pre-dispute arbitration in its contractual terms? The answer available in many jurisdictions is a jury trial waiver provision.
While not available in every state, most states do recognize the enforceability of a jury trial waiver provision. In constructing enforceable language, due regard should be given for:
- Clear and concise language expressing the jury trial waiver,
- Prominently and conspicuously placed,
- And, mutually binding upon both parties.
The conventional wisdom is that judges are more apt to deal fairly and at arm’s length with creditors and consumers than juries. That is, judges are less prone to be swayed by a kindly and sympathetic consumer’s argument that the creditor is unprincipled and unscrupulous in seeking repayment. Therefore, a well written jury trial waiver provision will often allow the dispute between creditor and debtor to be tried to a judge as trier of the facts, sitting without a jury.
Practice Pointer:If your jurisdiction permits, consider adding a jury trial waiver provision to your contract terms as an adjunct or an alternative to a pre-dispute arbitration provision.
Please note: This is the sixty-fourth blog in a series of Back to Basics blogs, in which relevant and resourceful information can be easily accessed by clicking here.