The State of Lending in a COVID-19 World
The fact that loan defaults are already as high as they were in 2010, at the peak of the Great Recession is an indicator of what’s to come. With high unemployment rates, businesses shuttering, whether temporarily or permanently, rents being missed, and the general uncertainty and malaise of the 2020 economy, more businesses and individuals are finding themselves in default.
What does this mean for lenders? A lot of time in court, spending lots of money on legal fees and court costs, or writing down massive amounts of unpaid loans.
Is the Courtroom a Thing of the Past?
The traditional way of handling financial disputes was, until recently, to litigate in court or to sell off bad debt at a significant discount. That is costly in terms of legal fees: every year, companies spend $654 billion in contract litigation in the U.S. alone; or, worse sell these debts at a massive loss.
It’s also, without question, time-consuming and unpredictable as to costs. Many courts are so backed up that it can take years to get an initial court date, let alone a resolution or trial. Plus, litigation records are public, and many corporations, businesses, and individuals don’t like or need that kind of information or perception in the public image.
Arbitration, and especially the new online arbitration, can be a step in the right direction in terms of creating a more flexible, confidential, and simple way of resolving disputes. Arbitration, in the right forum, can provide cost predictability, reliable timelines, and just results.
With the sort of online arbitration that is available today, disputes can be resolved quickly, predictably, and, for some disputes, a lawyer (or full-time lawyer) may not be needed. Online arbitration businesses are now available that utilize the newest technology, use qualified industry experts as arbitrators that can render binding and final decisions within a matter of a few months, all at a flat-fee rather than at an ever-expanding hourly rate.
As a bonus, these online arbitration hearings are private, and the parties involved can benefit from the confidential nature of these proceedings.
All that being said, with the advent of technology, there’s no reason why you need a courtroom or in-person arbitration to resolve certain types of legal disputes.
How Online Arbitration Works
Removing the delay that today’s courts are facing coupled with the ever-expanding cost of attorneys’ fees and costs will free up a business’s resources and time. Online arbitration can provide that relief, quickly and cost-effectively. Typically, the online arbitration process starts with the Plaintiff generating a claim and uploading their supporting evidence. The Defendant is provided notice of the claim electronically and by mail or overnight delivery.
The Defendant is provided an opportunity to respond to the claim through the online platform, sharing their side of the story, any legal defenses, and their supporting evidence. At this point, both parties are given an opportunity to address and counter each other’s claims or defenses.
After that initial stage, which typically takes about 30 to 45 days, a judge (or an “E-Judge,”) with specific industry expertise is assigned to the dispute and will review evidence and testimonials from both sides. The E-Judge can message the Plaintiff or the Defendant through the online arbitration platform as necessary, and, after being satisfied that he or she has sufficient evidence to render a decision, the E-Judge will issue a final and binding award that can then be reduced to a judgment by a court with proper jurisdiction.
Why Consider Online Arbitration?
Any lender or creditor who has gone through the arduous process of litigation will appreciate the efficiency of both parties being able to upload documents on their own schedules, asynchronously, as well as being able to avoid time-consuming trips to court. Having the E-Judge conduct discovery, rather than the parties themselves, removes the gamesmanship, delay, costs, and inefficiencies that discovery inevitably causes.
Online arbitration can resolve claims within a few months, not a few years, and companies can spend just 30% of what they would typically pay for litigation, if not less. That saves money. It also allows for businesses and financial institutions to initiate claims that they would have otherwise written off or sold for pennies on the dollars due to the fact that collections or enforcement was not cost-effective, thus giving them the ability to process smaller claims that they would otherwise write off or sell due to the costs of disputing them.
Online arbitration is legally binding and court-recognized, and awards are fully enforceable. Judges are independent, neutral, and impartial and are typically assigned to claims based on jurisdiction and subject matter expertise.
The question is: why would you litigate or even arbitrate in-person when there is now an effective and affordable solution available online?
Even when we return to our offices and get back to in-person activities, online arbitration will now be the most effective and time-saving option for lenders and businesses to resolve their legal disputes.