Allegations that the arbitration process is rigged against consumers

If you’re in the U.S. and you have a credit card, you may be very familiar with arbitration clauses. Most of the credit card companies, and plenty of other companies you do business with, have these clauses in their contracts. What they generally say is that you the consumer give up your right to ever have your day in court. Instead, you agree to go through binding arbitration, a private process in which the arbitrator makes a decision and you can almost never appeal.

Consumer advocates hate these arbitration clauses. The process is heavily weighted against the consumer, and the consumer has essentially no recourse if things turn our wrong.

It is often alleged that the arbitrators who decide these cases are not independent or unbiased. The credit card companies essentially keep them in business, so how can they be unbiased? Are they going to decide against their bill-paying clients?

But how do you prove the allegation that the process is rigged in favor of the credit card companies? It’s next to impossible.

But Deanna Richert, a former manager for NAF (National Arbitration Forum), has essentially blown the whistle on the process. She has filed a lawsuit against her former employer, and in it, she makes some serious allegations. The Wall Street Journal Law Blog reports:

In her suit, Ms. Richert describes a world that was anything but unbiased, where NAF went to great lengths to please the big credit card companies that were its repeat customers. See previous LB coverage here. Ms. Richert claims to have witnessed managers instructing employees to call arbitrators and tell them to change decisions they’d made against credit card companies. At the same time, the suit said, arbitrators also called NAF to ask how they should rule on issues before them.

Of course, the NAF says she has no proof of her allegations.

Except she’s not the only one saying that the NAF process is rigged in favor of the credit card companies. A Wall Street Journal article reports the following:

A former part-time NAF arbitrator, Harvard University law professor Elizabeth Bartholet, testified before the Senate Judiciary Committee last year that NAF discontinued sending her cases in 2004 shortly after she ruled in favor of a consumer.

Before that case, she had ruled in favor of credit-card companies 18 consecutive times, she told the committee. She says she finished several pending NAF cases after she ruled for the card holder, but then wasn’t given more cases. The official reason the NAF gave for canceling more work was scheduling conflicts. But Ms. Bartholet said in an interview that an NAF manager told her she was likely removed because she ruled for the debtor. “Someone else will fill NAF’s vacuum if Congress doesn’t reform the [arbitration] system,” Ms. Bartholet said.

Forgive me for being skeptical of the fairness of the arbitration process. It’s difficult to rule against those who put food on your table.  And are these two women making up their stories? I doubt it.

It’s time for consumers to take a stand against the arbitration process which clearly puts them at a disadvantage and denies them due process. Oh sure… I understand that consumers consent to this process when they do business with the credit card companies. That’s why it’s time to either stop doing business with them or do something to force a change that makes things more fair for the consumers.

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