San Francisco lawsuit: Odds stacked against consumers in arbitration cases

As someone who has spent a fair amount of time inside casinos, I know a little bit about the house odds and which games give me the best shot of coming out on top. Play the pass line on craps. Don’t play the bonus bet on Pai Gow and stay the hell away from the slot machines. Then consider these numbers from Nathan Koppel’s Wall Street Journal article about the city of San Francisco suing one of those arbitration companies that settles disputes between consumers and credit card companies: “From 2003 through March 31, 2007, 18,075 consumers’ arbitrations in California were resolved through hearings conducted by the NAF, according to the suit, citing data reported by the NAF. Thirty of the matters, or fewer than 0.2%, were won by consumers.” Talk about the odds being stacked in the house’s favor.

Kia Franklin at Tortdeform points out some links about the issue that have appeared on that blog. As Kia points out, many consumers don’t realize how much they’re giving up when they agree to the terms of service on credit cards that require binding arbitration as the method of settling disputes.

Yet despite all the whoops and hollers, it seems that many people are either a) unaware that binding mandatory arbitration agreements exist, and to such a pervasive extent, or b) unconvinced that binding mandatory arbitration poses fairness problems for the individuals who find themselves in a dispute and restricted to this forum for resolution of the dispute.

The San Francisco suit is picking up where a Public Citizen report released last year left off. Read the report and come to your own conclusions about a U.S. Chamber of Commerce survey released last week that says a majority of consumers would prefer to take their complaints to arbitration than to court.

The Chamber is trying to build its case against Arbitration Fairness Act (S. 1782/H.R. 3010), which would protect consumers by allowing them to have other choices besides binding arbitration.

Do you think the people who say they’d prefer arbitration would feel that way if they had all the facts about arbitration before answering the question? Don’t bet on it.

[Update: Here’s the San Francisco Chronicle story on the lawsuit]