Mandatory Credit-Card Arbitration Challenged

By The Dallas Morning News | Tribune-Review/Pittsburgh Tribune-Review, September 1, 2009 | Go to article overview

Mandatory Credit-Card Arbitration Challenged


The Dallas Morning News, Tribune-Review/Pittsburgh Tribune-Review


If you have a dispute with your credit card issuer, stockbroker or cellphone provider, chances are you'll have to resolve it through arbitration -- like it or not.

"The vast majority of consumer sales contracts include a provision requiring the consumer to waive his or her right to file a civil suit for damages or injuries involving the product," said Russell Budd, partner at Dallas law firm Baron & Budd. "They have to go through arbitration."

Arbitration is an alternative to going to court that, depending on whom you talk to, is either an efficient means for resolving disputes or a flawed process that's weighted against consumers.

In arbitration, a panel of arbitrators or a single arbiter will read your claim, study the evidence, weigh the arguments of both sides and render a binding decision.

Arbitrators' decisions can be appealed only in very rare circumstances.

"It is occasionally done successfully," said Richard W. Naimark, senior vice president at the International Center for Dispute Resolution at the American Arbitration Association. "The legal grounds are quite narrow."

Businesses say they favor arbitration because it saves legal costs, is more efficient and resolves disputes more quickly than a court.

"It doesn't have a lot of formal processes that you have in court, and it's a way to resolve a dispute, particularly smaller matters, that's less adversarial," said Lisa A. Rickard, president of the U.S. Chamber of Commerce's Institute for Legal Reform. "It does not have transaction costs and doesn't put a lawyer in the middle of it."

Plus, cases aren't prolonged because the outcome can't be appealed.

But consumer advocates oppose mandatory arbitration, saying the process virtually stacks the deck against consumers.

"It's horrible for consumers," Budd said. "If a consumer goes into an arbitration, they're going to be completely outgunned. The other side is going to be fully represented and they're not going to want a consumer claim to be granted against them because they sell these products and services to millions of people."

Consumers are often forced to agree to resolving any dispute through arbitration in order to receive services or products, according to the American Association for Justice, which represents trial lawyers.

"There is virtually no way to access the court system when you're under a forced arbitration clause," said Julia Duncan, associate director of federal relations for the lawyers group. …

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