Arbitration opponents complain that mandatory arbitration clauses “deprive” consumers of a day in court. One such set of complaints was aired in a big Business Week story (to which NAF responded and refuted); CNN recently repeated these allegations in a one-sided story. So it’s worth taking a look at how well consumers do in court when it comes to debt collection:
In the courtroom, the biggest advantage collectors have are lawyers while defendants rarely have legal representation. …
In 2007, debt collectors obtained 60,699 default judgments where the accused debtor did not appear in court [in Chicago].
(Ameet Sachdev, “Debt collectors pushing to get their day in court”, Chicago Tribune, June 8). In civil court, a default judgment can be obtained merely on a plaintiff’s say so. In contrast, most arbitration agreements require the arbitrator to scrutinize the evidence before granting an award, even when the debtor does not contest the arbitration claim–one of the many reasons why consumers are better off under mandatory arbitration. And because arbitration is cheaper and faster than court proceedings, the savings can be passed on to consumers at large. Unfortunately, there are thirteen separate bills before Congress proposing to abolish a consumer’s right to pre-commit to arbitration and extract the resulting savings from the businesses with which they contract. As a coalition of business groups note:
If successful, these legislative efforts would retroactively declare unenforceable potentially millions of provisions for the orderly and economical resolution of disputes. Opponents of pre-dispute arbitration have neglected to realize that, if enacted, these provisions will actually limit the realistic opportunity for an average consumer, employee, and investor to obtain a remedy if a dispute arises. Evidence shows that arbitration can be very useful in the context of low-value claims. Studies show that plaintiffs’ lawyers are reluctant to take cases involving relatively small claims because they seek larger potential attorneys’ fees than would likely result from these cases. According to one survey, plaintiffs’ employment lawyers said they would not take a case unless it was worth at least $60,000, on average. Therefore, without the option of arbitration, consumers would be faced with two choices—to try to navigate the legal system on their own, or to abandon their claim. The only real beneficiaries of these anti-arbitration provisions and bills would be class action lawyers who would benefit from both the rare blockbuster claim and the possibility of bringing more class action lawsuits—lawsuits that provide little benefit to class members while ensuring large payouts to class action attorneys.These attacks on arbitration are unnecessary and would undermine a system that has benefited consumers, employees, and businesses for decades, and on which many of them now rely. Accordingly, we strongly urge you to oppose any anti-arbitration legislation or provision.