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.