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Public Citizen Responds to Their Critics on Arbitration

posted by Bob Lawless

In September 2007, Public Citizen released a report entitled The Arbitration Trap: How Credit Card Companies Ensnare Consumers. Using data from California arbitrations, the Public Citizen report shows how consumers are forced into a mandatory arbitration where they will be systematically disadvantage. Credit Slips blogger Elizabeth Warren wrote a post about the report, including this:

Public Citizen has picked a good target, and they have written a superb report.  There is solid research to back up the claim that arbitration is systematically biased. Senator Russ Feingold has introduced legislation to ban mandatory arbitration clauses imposed on consumers. Will this be the first serious consumer reform initiative in more than two decades?

That's exactly right, but the U.S. Chamber of Commerce did not like it. Through its Institute for Legal Reform, the Chamber had Navigant Consulting write a response to the Public Citizen report. Public Citizen has now released their own response to the Chamber of Commerce/Navigant report. The Public Citizen response, The Arbitration Debate Trap: How Opponents of Corporate Accountability Distort the Debate on Arbitration, which also takes on a law review article and a different Chamber of Commerce report by law professor Peter Rutledge.

Yes, the fact that Public Citizen and the U.S. Chamber of Commerce disagree is hardly news. As I am fond of saying, however, it is not that academics are unerring geniuses, but the point is no one is paying us for a particular opinion. The Public Citizen report is simply much closer to the position of most academics. For my money, the Chamber of Commerce's response is another example of how large corporate interests often distort debate by trying to make inconvenient facts appear to be contested when most experts consider the matter settled. For example, in a Credit Slips post and later academic paper, Adam Levitin showed how the mortgage industry's claim of 2% interest rate hike in response to a bankruptcy bill was hokum. Also consider Elizabeth Warren's post and earlier paper on the bogus claim that the bankruptcy system was a $400 "tax" on Americans. On a broader stage, the global warming issue comes to mind as another example.

As far as I can tell the Chamber and Navigant Consulting have come to the not-so-startling conclusion that if you count anything coded as a "dismissal" as an arbitration win for consumers, consumers win many more arbitrations. Court cases and arbitrations are dismissed for lots of reasons, many of them procedural. In the cases that are not dismissed and go through an arbitration hearing the Chamber/Navigant analysis still shows a win rate for businesses of 99.8%. That does not seem like a fair system.


Perhaps, in cases not dismissed, the businnesses had rock solid cases, meriting a win rate of 99.8%.

Sure, it is unlikely, but it is possible. Just as it is possible for me to jump off the Empire State Building and live to tell about it.

Nice post on our new arbitration study. One observation I will make is that these recent academic papers defending arbitration *do* appear to reflect an interest group (the U.S. Chamber) funding academic research, either by supporting an academic department, an actual professor -- or both.

There is an easy way to settle this. . . if the U.S. Chamber of Commerce is willing to submit the issue to binding arbitration before a panel made up of law professors.

I'd give 'em about a .2% of proving the present system is fair.


Americans Are Angry
Debacle far from over.

This economic crisis is not going to get better. The crooks continue to bleed the American public, forcing families to financial and emotional chaos.Homeowners have hung on by their finger nails trying to give their families some similance of Christmas and the holidays before declaring bankruptcy and going into foreclosure.

Bail out the crooks that brought our great nation to this?
Let Big business learn what it is like to live on a budget. Let them learn to live on money they don't steal. The middle class has been put on hold. No one listens. We just hear recorded messages in the great cyberspace, where no one cares.The people we elected to govern our interest, govern their own. We are bombarded by the slick, small printed greed of big business. They have stealthily stabbed us with: substandard construction, defective homes, inflated appraisals, fraud, crooked mortgage companies, glutinous banks, arbitration companies, high interest bank cards, over priced drugs and claim denied insurance companies. This is what has destroyed the middle class, the back bone of this economy.

At first the powers that be said it was our fault. We were just stupid and bought more than we could afford.Then they said it was a down turn in the economy, liquidity, a market correction, bla, bla, bla... when it is really greed. Greed protected by arbitration clauses and guarded by the checkbooks of big business.

This all makes me think of American Indian. They signed pieces of paper and trusted our government and they too became homeless.
Jordan Fogal

My name is Jordan Fogal. I was born on a farm in Taylorville, Alabama.I watched animals and insects. I learned they have a special sense concerning weather changes. For example ants will build higher hills right before it rains so the water does not run inside.We the people are also like these worker ants. We sense the imminence of a storm before the obvious. We know our groceries are costing more. We know the dollar does not go as far. We feel the pressure of our co workers being laid off. We know we must then do the work of two or we may not have a job at all. We get the same pay and are afraid to complain. We have families to feed. We knew there was a recession long before the mention of the word. When the economic sanomie was finally recognized by our economic geniuses, they blamed us, the stupid worker ants that bought more than we could afford. We the people: who work, pay our taxes and follow the rules of the law are the ones to blame?
We were too busy working to think up ways to cheat others out of their hard earned money. But those in power have made the path of their ill gotten gains difficult to trace with all the corporate high jinks.
Greed has infected corporate America and our government. They no longer work for the people who voted for them.They are beholden to big business. Big business bought their seats and their votes. We have no voice. We spend hours and days, we needed to work, trying to reach "our" consumer protection agencies and "our" representatives.
We are shown over and over just how insignificant we are, like the worker ants serving the queen. Our job is to work and shut up. Road blocks are in place so our voices are silenced. We try to call and are met with computerized voices that send us no where except to other agencies that send us to other agencies that keep us on hold and play music for us. If by chance a human should be reached it is not their fault, it is not their responsibility, and we are referred or rerouted or... oops you are disconnected. Hours we waste taking to computers. They wonder why consumer confidence is so low? We are beyond frustration. We are a nation of angry people. And from this womans' prospective we have every right to be angry. We write emails that disappear in the black hole of cyberspace. If they get a response it is a computer generated, signature stamped email or letter that does not even address the subject in question.
Millions of us have been neatly hidden under the title sub primes. We know what really happened. But no one will listen because then action would have to be taken. A blind eye was turned and now knee jerk reactions pay the real culprits. And they pay them again with our money. Bail outs... pay offs to make us, the stupid people think we will be the recipients of assistance. The government can give no money it does not take from someone else.
When the worker ants are destroyed who will feed the queen?

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