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.