An arbitration clause in a contract is one of the smartest things you can do. A properly drafted arbitration clause provides a cost-effective and speedy resolution to a dispute.
Lenders don’t set out to lend money to people or businesses who won’t pay it back, but default rates, as any lender knows, tell a different story.
Loans in every category have high default rates, for example, one in six SBA loans from 2006 to 2015 went into default. And, one out of every 10 Americans has a defaulted student loan.
In 2018, the mortgage delinquency rate was 4.4% and climbing. Lenders’ options to enforce their loan agreements are limited.
With so much unpaid debt, a financial institution can either attempt to recover the debt through collections or litigation, sell the debt at a significant loss or simply write it off.
Arbitration, specifically online arbitration, presents a new and efficient option.
Why is so much debt left unpaid?
The short and simple answer is that filing a lawsuit is expensive. If there is any return on litigation to recover debt it is often only pennies to the dollar and is simply not worth the time and money.
Why spend over a year in court (or more…), trudging backward and forwards, dealing with “fishing expeditions” during the Discovery Phase of the trial, spending good money after bad to barely break even?
This is why so many lenders end up selling off debt to debt collectors or writing it off. Further, in a COVID-ravaged world, the problems of traditional litigation in a courtroom have been exacerbated with years-long delays, canceled hearings and absent staff.
Before the pandemic, the civil courts lurched from one case to the next, putting off appearances and hearings, rescheduling dates, adjourning because one or more parties have not turned up… the list goes on and on.
Now it is worse. Covid was the straw that broke the camel’s back, sending the court system into a tailspin. Court waiting times are longer than ever, costs are skyrocketing, and who wants to sit in a stuffy courtroom with the threat of catching a potentially deadly disease.
That is where the online arbitration process comes into its own.
What is online arbitration?
Online arbitration is a form of alternative dispute resolution (ADR) and is referred to in the industry as online dispute resolution (ODR).
It is a legally recognized process that allows a claimant to file a claim against a respondent online utilizing technology to streamline and accelerate the process and to bring costs down–significantly. Brief, the online arbitration platform leader, is a 100 percent online platform.
Brief makes it easy with its process involving six easy steps.
From filing a claim, to discovery and a final decision, the entire process is managed on its proprietary online platform.
If the E-judge rules in your favor and you prevail, a binding final award is rendered, which can be filed in a state courthouse to be reduced to an enforceable judgment. (Binding awards are issued if the agreement calls for a binding award.)
The question is: Do you have the correct arbitration clause in your financial contracts, if any at all?
The benefit to including an Arbitration Clause in contracts
Facts often speak for themselves. Over 50 percent of US lending institutions include a mandatory arbitration clause in their loan contracts.
A final and binding arbitration clause can clearly communicate the consequences of not paying the loan in full to the borrower which, one would hope, would deter default.
And if it doesn’t, it paves the path to a streamlined process for resolving the matter quickly and at a lower cost than going to court would entail.
The key to getting arbitration agreements right is to clearly set out the rules of arbitration, leaving no grey areas that could hinder the debt recovery process or create a dispute arising from unclear terminology.
Where can I find a template for a standard Arbitration Clause?
Brief makes it easy with its clause builder platform. Each contract and deal is different. But essentially, dispute resolution clauses should have the following (or similar) text included: “The parties to this contract hereby agree to resolve legal disputes exclusively through binding arbitration”.
The above text means parties agree that arbitration will be a legally binding process that can be used if a dispute arises.
Brief offers a free-to-use arbitration clause example that you can customize to suit your needs.
The arbitration clause sample comes in both long-form and short-form.
Including an arbitration clause or provision in your contracts ensures that you are serious about collecting unpaid debt and leaves no room for confusion.
Are you ready to recover what you are owed?
Brief has helped small and large businesses across the United States recover debts that were simply not worth the cost of traditional litigation or arbitration if not for online dispute resolution.
Register now on our online portal. If a dispute arises, it is a simple process to submit your claim, all for a flat upfront fee.
Brief’s online arbitration platform is typically 80 percent faster (or more) than a civil court hearing or traditional “brick and mortar” arbitration.
Satisfied and repeat participants include electronic commerce sites (Fintech), factors, banks, MCAs, and other lenders.
Brief also handles all types of monetary disputes as well as declaratory relief actions such as quiet title, coverage claims and warranty claims.
Our screened network of “Ejudges” spreads across all 50 states and each case is matched to the jurisdiction and subject matter expertise of the Ejudge.
You can request a demo from our homepage or call one of our arbitration consultants today on tel: +12134443794. Alternatively, drop us an email at [email protected].
Brief is a market-leading online arbitration platform in the United States. Our 100 percent online alternative dispute resolution platform helps businesses protect their contracts and agreements through online arbitration. Follow us on LinkedIn or Facebook for updates and news about online arbitration and more.
*Brief cannot and will not give legal advice on any matters, financial or not.