Public Citizens Arbitration: Report Misses The Mark

This time, the topic is arbitration, a subject that is important to dealers because, for them, a fair and well-drafted arbitration agreement is the best first line of defense against class action lawyers and other predatory litigators.

On September 27, Public Citizen issued a press release that railed against credit card companies that have begun to use the arbitration process in collecting debts owed to them by consumers. The release also criticized the National Arbitration Forum, one of the largest arbitration organizations in the country, and claimed abuses in the arbitration process.

The foundation of the report is Public Citizen’s claim, based on its study of nearly 34,000 collection cases, arbitrators found in favor of businesses in 94 percent of the arbitration proceedings.

That 94 percent evoked the following quote from Joan Claybrook, Public Citizen’s President: “People shouldn’t have to give up their legal rights just to get a credit card. This is a system that is unfair to consumers, many of whom are struggling financially, and a huge gift to big business. We need to ban arbitration clauses in consumer contracts now.”

Really?

Evidently, the press agreed. Public Citizen’s report was picked up by many news sources, and quoted liberally (no pun intended) and uncritically.

It’s the “uncritically” part that really steams me.

Remember, Public Citizen tells us that these 34,000 arbitration proceedings were “virtually all” collection cases. What Public Citizen didn’t bother to tell us was the percentage of consumer collection cases tried in court where the outcome is favorable to business. Remember that collection cases are nearly always straightforward. Consumers understand they owe the balance claimed, so they do not bother to contest the claim and often don’t even show up for the trial. I do not know how consumers fare when defending collection lawsuits in court, but I am aware of at least one Georgetown University Law Center study indicating the percentage of courtroom outcomes in favor of businesses is as high as, if not higher than, the 94 percent that caused Public Citizen such anxiety.

Isn’t the real question to be addressed, the question of whether arbitration outcomes are more or less favorable for the consumer than litigation outcomes? Public Citizen doesn’t even hint that it might be appropriate to compare courtroom outcomes with litigation outcomes before jumping to unfounded conclusions. And, as far as I know, no reporter even bothered to ask the question.

That’s the intellectual dishonesty in the Public Citizen report. What if someone actually bothered to look and the litigation figures turned out to be essentially the same as the arbitration figures? Will Joan Claybrook call for the abolition of the court system because businesses win 94 percent of their collection lawsuits?

Don’t hold your breath.

Vol 4, Issue 12