NY Times blasts arbitration- again

By: The VNN Team  //  Arbitration

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Following a three-part series on arbitration, the New York Times has published another story, this time blasting the ads attacking the Consumer Financial Protection Bureau, the government agency that’s attempting to open the courtroom doors for consumers once again.

The ads are, according to the Times, “… multiple efforts across the country in recent weeks by both advocates and opponents of arbitration to revisit the much-debated practice, which, in two powerful decisions beginning in 2011, has been affirmed by the United States Supreme Court. The most significant moves came in Washington, where regulators, lawmakers and the Justice Department pushed for new restrictions on arbitration.”

The story continues, “At the same time, the U.S. Chamber of Commerce, the most powerful business lobby in the country, started a new effort to block the Consumer Financial Protection Bureau by lobbying lawmakers to attach a rider to the federal budget bill that would force the regulator to conduct a new study before issuing any rule, according to people with direct knowledge of the strategy.

“Proponents of arbitration, who say it provides an efficient alternative to courts, view the Consumer Financial Protection Bureau as among its biggest threats. They say a new rule proposed by the consumer agency, which would prevent financial services companies from including class-action bans in consumer contracts, could in effect kill arbitration altogether.”

The series examined arbitration and took an in depth look at how the consumer is often left on the losing end of arbitration hearings.

Many consumer contracts contain arbitration clauses that, when agreed upon, waive a consumers right to go to court. Many consumers are unaware they even agreed to arbitration until they’re involved in a dispute and learn they waived their right to have their day in court.

There are stark differences between having a case heard in court and having an arbitration hearing. An arbitrator does not have to rule on the law, while the courts must. The courts rarely award legal fees to the prevailing party; arbitrators most often do, and those legal fees can add into the tens of thousands.

Arbitrators don’t have to hear testimony from all witnesses or no witnesses if they so chose. Courts often allow testimony.

One of the more compelling problems with arbitration is the clause that prevents consumers from filing a class action lawsuit, and even if the courts do allow it, there may not be enough consumers to join the suit. That’s because most consumers agree to contract terms, hence, waived their right to sue in court. It’s only those who opt out of the arbitration clauses who can take a dispute to court.

Opting out isn’t an easy process. It requires writing a letter to an address specified by the particular company within a specified period of time and sending it off via snail mail. As proof of opting out within the time frame, it’s best to send the letter certified.

Should the Consumer Financial Protection Bureau be successful in changing any or all of the arbitration laws it will leave businesses subjected to more class action lawsuits.

The Times noted, “One reason arbitration advocates consider the bureau a significant threat is that it is empowered to issue rules without legislative approval, making them more difficult to defeat.”

The Times series has gotten the attention of lawmakers. Senate Judiciary Committee Ranking Member Patrick Leahy (D-Vt.) and Senator Al Franken (D-Minn.) are calling on the leading providers of arbitration services to address concerns about the use of such agreements (see related story).