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.