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Arbitration: Attorney’s General speak out

February 13, 2015  //  By:   //  Consumer News  //  No Comment

by Carol Thompson

While the Arbitration Fairness Act  (H.R. 1844, S. 878) sits idly in Washington, over a dozen state attorney general’s are appealing for change.

Late last year 16 state attorney generals wrote to the Consumer Financial Protection Bureau requesting the agency exercise its statutory authority to regulate the use of pre-dispute mandatory arbitration clauses in consumer agreements for financial products or services.

“As the chief consumer protection officers in each of our respective states, we are concerned about such clauses and the class action prohibitions often associated with them,” the attorney’s general wrote.

“The need for regulations to protect the public interest have never been so great,” the letter states. “Over the past decade, judicial decisions and business practices have diminished consumers’ rights and bargaining power with respect to contracts for financial services.”

The attorney’s general note that the Federal Arbitration Act of 1925 has eroded in premise. “Mandatory pre-dispute arbitration is procedurally unfair to consumers, and jeopardizes the one of the fundamental rights of Americans; the right to be heard and seek judicial redress for our claims.”

The letter states that the contractual requirements are neither voluntary nor readily understandable for most consumers.  “Investigative studies have revealed that arbitrators have a powerful incentive to favor the dominant party in the arbitration (i.e, the corporation) that is more likely to send them future cases.”

The attorney’s general note that the “repeat player bias” is unfair to the consumer who is bound by the arbitrator’s decision, without the option of further appellate review.

“The fundamental right of consumers to assert their claims in court should not be eroded through mandatory pre-dispute arbitration clauses included in adhesion contracts,” the letter states.

The letter is signed by the attorney’s general of Delaware, Kentucky, Massachusetts, California, Hawaii, Connecticut, Illinois, Iowa, Maine, Maryland, Mexico, New York, Oregon, Washington, Vermont and Rhode Island.

 

Image: Public Citizen

About the Author :

Carol Thompson is a veteran investigative reporter residing in central New York. She spent 23 years with a local newspaper, The Valley News, before leaving for the Syracuse New Times, and now, VNN. Thompson has won dozens of first-place awards for investigative reporting and was the 2006 recipient of the Syracuse Press Club’s prestigious Selwyn Kershaw Professional Standards Award. Thompson’s reporting has resulted in the arrest of public officials and has prompted policy changes. She uncovered two money laundering schemes that traveled the globe and resulted in the indictments of several developers.