Access To Justice

On my never-ending quest to ensure access to justice for all Americans, I am becoming particularly concerned about a trend affecting many of our clients, and that is, the practice of companies basically requiring their customers to go to arbitration if they have a dispute.

Here’s the background.  Essentially, buried in the fine print of that credit card application, purchase agreement, or other contract might be a clause that says that if you have a dispute with the company your doing business with, you agree to forfeit your right to sue the company.  Instead you and the company will go to arbitration.   Arbitration is a form of alternative dispute resolution whereby the parties agree to take their grievance to a third-party and to be bound by that third-party’s decision.

In the ivory towers of law school seminars (where alternative dispute resolution is often a required part of the curriculum) arbitration makes a lot of sense.  It cuts down on legal fees, frees up court time for more serious disputes and can be efficient for all involved.  But at what cost to legal rights?

Earlier this month, Public Citizen, a watchdog group issued a report called: Forced Arbitration: Unfair and Everywhere.  The report found “that seventy-five percent of companies in eight industries use forced arbitration. In most forced arbitration cases, consumers are stripped of their right to go to court over disputes when they open a bank or credit card account, obtain cell phone service, hire a stockbroker or buy a house.”

These stats might lead you to ask:  If Arbitration is so fair and unbiased, then why do big companies like banks and lenders favor it as their preferred method of dispute resolution?

The answer of course is that it’s often neither fair nor unbiased.

Public Citizen estimates that arbitrators have sided with companies over consumers, an astonishing 94% of the time.  These stats did not go unnoticed by regulators.  In July, Minnesota Attorney General Lori Swanson filed suit against the National Arbitration Forum.  The suit alleged a bias on the part of NAF arbitrators in favor of the companies over the consumers.  The NAF settled with Swanson almost immediately and agreed that they would get out of the business of arbitrating credit card and other consumer collection disputes.

Swanson’s lawsuit and resulting settlement has had a positive effect, The American Arbitration Association also suspended its credit collection division in response to Swanson’s concerns and Bank of America and JP Morgan Chase dropped their forced arbitration clauses shortly after the lawsuit was filed.

To be clear, arbitration can sometimes be a reasonable way for parties to arrive at a fair outcome.  But to do that, it must be a process that the parties agree to mutually, not one forced on the consumer through the fine print, and handled by a clearly anti-consumer arbitrator.