July 15, 2008

Important Consumer Protections Move Ahead; House Subcommittee Passes Arbitration Reform Bills

Statement of David Arkush, Director, Public Citizen’s Congress Watch Division

Today, the U.S. House Subcommittee on Commercial and Administrative Law took an important step toward protecting American consumers from companies that would take away their access to the courts.

By reporting out the Arbitration Fairness Act (H.R. 3010), the Automobile Arbitration Fairness Act (H.R. 5312) and the Fairness in Nursing Home Arbitration Act (H.R. 6126), the subcommittee sends a strong message: Consumers deserve the right to choose whether to solve their disputes in court or through private arbitration.

Most consumers don’t know that they’ve been stripped of the right to take credit card companies, banks or cell phone providers to court for wrongdoing. These and countless other service providers immunize themselves from accountability with contracts that require all disputes to go to secretive, private forums chosen by the company. These binding mandatory arbitration requirementsare buried in the fine print of contracts and, even if consumers find them, are rarely negotiable.

Forcing consumers to settle disputes through arbitration gives corporations an unfair advantage by allowing them to hand-pick business-friendly arbitrators, while saddling consumers with costs far higher than those in court and much slimmer chances of success. Allowing big corporations to shop for arbitration firms and impose them on consumers creates nothing less than a market for injustice in which arbitrators compete to favor corporations. The solution is to give consumers a meaningful choice on whether to arbitrate.

The three bills passed by the subcommittee will level the playing field between consumers and big business by ensuring that all arbitrations are truly voluntary. Arbitration is fair only when both sides have a choice in the matter. When corporations can force arbitration on consumers, it becomes an abusive weapon.

We applaud the members of the subcommittee for standing up for consumers, and we urge their colleagues to continue moving these bills toward enactment. Consumers deserve the right to choose how to settle their disputes.