Kia Franklin

Obama Administration straddling fence on forced arbitration?

Where does the Obama administration stand on the issue of forced arbitration? Apparently, with one foot on each side of the line.

Consumerist shared clips from their entertaining and informative interview with Austan Goolsbee, President Obama's senior economic adviser, about consumer protection and credit card industry reform. The interview is presented in a four part series, and here are links to the first, second, and third parts. I want to highlight part four because it deals with an issue that has been the subject of so many posts and debates on TortDeform. That's right, part four discusses pre dispute binding mandatory arbitration (bma), also known as forced arbitration.

The good folks at Consumerist ask Goolsbee where the Obama administration stands on the issue of forced arbitration and whether there could be room to include an anti-bma provision to the Credit Cardholders Bill of Rights. The answer leaves much to be desired. Here's the Consumerist clip:

His answer... well, isn't one. Goolsbee acknowledges that things like institutional bias and the repeat player effect sound very problematic, but he does not give a firm answer against or supporting the use of arbitration. In fact, he even uses the old "flood of litigation" standby to argue a supposed benefit of forced arbitration. But when companies systematically abuse consumers through an unfair form contract provision that pervades the entire industry, stemming the tide of legitimate consumer lawsuits is not a good thing. Instead, this enables the credit card industry to continue and profit from abusive practices, without the accountability of the law.

To be fair, Goolsbee does seem open to information about the abuses of forced arbitration, but the truth is that tons of concrete information is already out there. You've got the FairArbitrationNow Coalition (of which I am a member). You've got Public Citizen's many groundbreaking reports. And DMI has our own report that discusses forced arbitration. Additionally, dozens of consumers from across the country recently traveled to DC to share personal stories about the arbitration system, so the administration can ask the people themselves.

It is acceptable, and preferable over simply fudging an uninformed answer, to admit when one is undecided on a particular issue. But people in positions of influence, when presented with information that demonstrates the urgency of the issue, have a professional obligation to get informed and then take a stand. This must involve talking to advocates and real people affected by the issue, not just credit card industry reps. And that's what we should be calling on Obama's economic advisers to do, soon.

See DMI's prior coverage of The Credit Cardholder's Bill of Rights and the Credit Card Accountability, Responsibility, and Disclosure Act

Kia Franklin: Author Bio | Other Posts
Posted at 1:25 PM, May 20, 2009 in Arbitration | Consumer Rights | Corporate Abuse | Legislation | Mandatory Arbitration
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Didn't the question specifically raise the issue of class action waivers? Why did Mr. Goolsbee completely ignore that part of the question? How can he ignore that part of the question when he is supposedly worried about "thousands of lawsuits", which is the very inefficiency that class action lawsuits are intended to avoid?

Mr. Goolsbee should add these legal pleadings to his reading list:

Posted by: Dennis | May 21, 2009 3:52 PM

thx for comments. and esp for that link. i've been meaning to blog about that! UNbelievable isn't it? well, actually, i could imagine the possibility...

Posted by: kia | May 21, 2009 4:27 PM

The Seventh Amendment hasn't been repealed. So how did Americans lose the right to trial by jury? In purchasing the modern world's necessities, from a credit card to a cell phone and even nursing home services, or accepting a new job, few Americans realize that they have signed away a crucial right. Tucked deep into lengthy contracts written in fine print is clauses dictating that any disagreements be resolved by arbitration, a judicial process in which an arbitrator issues a binding decision without ever having to make its reasoning public. An employee disputing poor working conditions or a nursing home resident alleging medical negligence might never know why their claims against a company were denied. Worse, since the arbitration firms have an interest in maintaining good relationships with the corporations that are their steady customers, it's little surprise that 98.4% of arbitration decisions by the top 10 arbitration firms are made in favor of companies--and against consumers, employees, and patients. The Arbitration Fairness Act, proposed this year in the United States Senate by Senator Russell Feingold (D-WI), protects against clandestine decision-making and corporate favoritism by invalidating pre-dispute BMA "agreements" between parties of unequal bargaining power. For safeguarding the right to trial by jury, where a body of law protects the rights of producer, consumer, employer, and employee alike.we must go up against the money and the power. Only when enough of us stand up and say no more and take back not only our rights but our lives and hold our elected officials accountable for bad legislation.
Jordan Fogal

Posted by: Jordan Fogal | June 9, 2009 10:42 PM