Labor & Employment Law

Attacking arbitration of credit card disputes

Public Citizen has launched a huge attack against the use of arbitration to resolve disputes between credit card companies and consumers.

• The Arbitration Trap: How Credit Card Companies Ensnare Consumers (77 page report from Public Citizen)
• Mandatory Arbitration Enables Credit Card Companies To Trap Consumers (press release from Public Citizen)
• Bogus Attack on Arbitration Really about Plaintiffs? Lawyers? Right to Sue (press release from Institute for Legal Reform, an affiliate of the U.S. Chamber of Commerce

Public Citizen makes some strong claims:

• "Consumers are railroaded into arbitration even if their identity was stolen or they never agreed to take disputes to arbitration. In several cases we uncovered, the National Arbitration Forum, which routinely handles MBNA?s ?collection? arbitrations, ignored repeated consumer protests that identity theft was the source of the alleged debt."
• "In fact, we found that the National Arbitration Forum is today the credit card industry?s go-to dispenser of swift decisions against its customers. The Forum and other arbitration providers obsessively enshroud their work in secrecy."
• "In the more than 19,000 cases in which an NAF-appointed arbitrator was involved, 94.7 percent of decisions were for business."
• "Arbitrators have a strong financial incentive to rule in favor of the companies that file cases against consumers because they can make hundreds of thousands of dollars a year conducting arbitrations. The arbitrators are chosen by the arbitration firms hired by MBNA and other corporations, which are unlikely to pick arbitration firms that produce results they do not like. Arbitrators routinely charge $400 or more an hour. Top arbitrators can charge up to $10,000 per day and some make $1 million a year."

Institute for Legal Reform's response:

• ?The plaintiffs? lawyers? attack on the arbitration system ? a process that has helped consumers resolve disputes for more than 85 years ? is nothing more than their latest attempt to enrich themselves by opening the door for more class action lawsuits."
• ?Arbitration has successfully given American consumers an effective alternative to get justice by quickly and fairly resolving disputes without being forced into an overcrowded and expensive court system."
• ?The average federal case takes two years to get resolved at trial, and only one percent of all federal cases actually get to trial. This compares to a recent California study showing that the arbitration system takes, on average, only four months to resolve a dispute. Other studies have shown that consumers initiating arbitration cases win about 60 percent of the time."
• ?The plaintiffs? lawyers? attempt to undermine the arbitration system is not about justice for consumers, it is about growing the size of their own pocketbook.?

I haven't seen a response from National Arbitration Forum.

Updated 09/28/2007: National Arbitration Forum blog posted the following yesterday afternoon:

The National Arbitration Forum Offers Updated Information on the Benefits of Arbitration

"Today, the National Arbitration Forum posted a report describing the facts about the fairness and affordability of modern arbitration. The Benefits of Arbitration report includes extensive statistical and anecdotal evidence supporting arbitration. This information establishes that arbitration is a vital element of the American civil justice system, where consumers and businesses alike can resolve disputes without going to court."

"Click here for the report on the benefits of arbitration."

Full post as published by Arbitration Blog on September 27, 2007 (boomark / email).