U. S. Chamber of Commerce Attacks Arbitration Fairness Act, Surprised?

The U.S. Chamber’s Institute for Legal Reform (ILR) yesterday launched a campaign to scuttle important consumer legislation pending in Congress.  The attack is aimed at the Arbitration Fairness Act (S. 1782/H.R. 3010) which is designed to protect consumers, employees and others from having binding arbitration imposed as the only means by which their disputes may be resolved.  For those of you who don’t know, the current problem with arbitration is its growing use by business to provide an edge in resolving disputes with their customers – and it’s appearing everywhere.  If you have a cell phone, credit card, bank account, auto loan, brokerage account, or a number of other goods services, chances are you’ve signed away your right to sue if things go wrong, without even knowing it!

This recent attack by the Chamber is in response to Public Citizen’s detailed report issued last fall which found that arbitrators employed by the National Arbitration Forum ruled against consumers in 94.7 percent of the 19,000 cases involving credit card holders.

In a broad and patently misleading claim the Chamber asserts, "The

sweeping legislation pending in Congress would effectively eliminate

arbitration, leaving many employees and consumers with little

recourse,” said Lisa Rickard, president of the U.S. Chamber Institute

for Legal Reform (ILR).  Of course, the legislation does nothing of the

sort.  It simply prevents business and employers from forcing

arbitration on unsuspecting customers and employees who don’t know they

“agreed” to it all, or agreed only because it was a condition of having

a job, getting necessary medical care, buying a car, opening a bank

account, getting a credit card, and the like. Oftentimes, because of

the deliberately fine print used, consumers are not even aware that

they have given up their rights.

In a feeble effort to bolster their attack, the Chamber commissioned a

survey!  Should we be surprised that the Chamber’s poll found “that 71

percent of likely voters oppose efforts by Congress to remove

arbitration agreements from consumer contracts, and 82 percent prefer

arbitration to litigation as a means to settle a serious dispute with a

company?”  Surveys paid for by special interest groups are notorious

for coming up with the result desired by those paying the bills.

The survey’s main finding is beside the point because the legislation

does not “remove arbitration agreements from consumer contracts,” it

simply forbids business, before any dispute arises, from imposing an

agreement to arbitrate as a condition of doing business or employment.

In fact, the purpose of the legislation is to insure that when a

dispute arises, both parties will have a choice on the best way to

resolve their dispute.  We assume that in many cases the parties will

agree arbitration is the best way to resolve their dispute.  They will

be free to make that choice.  On the other hand, if they prefer legal

action, they will have that right.  The legislation simply provides

that the business or employer cannot foreclose the option of going to

court by inserting arbitration as the only method of dispute resolution

in the fine print of the agreement before any dispute ever arises.

Today, many consumer and employment contracts contain provisions

mandating the consumer or employee to resolve any future conflicts by

arbitration rather than filing a lawsuit.  This has become the norm in

cell phone, credit card contracts and investment broker agreements.

Historically, arbitration was intended to resolve disputes between

businesses, in which each side was knowledgeable and had relatively

equal sophistication and bargaining positions.  However, a series of

Supreme Court decisions has changed the meaning of the law so that it

now extends to disputes between parties of greatly disparate economic

power, such as consumer disputes and employment disputes. As a result,

a large and rapidly growing number of corporations are requiring

millions of consumers and employees to give up their right to have

disputes resolved by a judge or jury, and instead submit their claims

to binding arbitration.

The result, unfortunately, is that the method of arbitration chosen by

business often disfavors the consumer or employee and there is little

or no transparency, because the claims are resolved without public

scrutiny or meaningful judicial review.  The purpose of Arbitration

Fairness Act is to provide the consumer and employee with a real voice

over the means by which disputes will be resolved.  The legislation

levels the playing field and says that when a dispute occurs both

parties will have a say in how it will be resolved.  Undoubtedly, if

the method of arbitration offered by business is fair, inexpensive and

rapid, many will elect to proceed via that route, however if it appears

that the system is tilted to favor the business, the consumer would be

free to choose a judge or jury to resolve the dispute.

If the Chamber had asked its poll participants whether they would like

to have a voice in how their dispute will be resolved, we are confident

the answer would have been an overwhelming yes.  In fact, that is so

clear that a survey would not be necessary at all.