Later On

A blog written for those whose interests more or less match mine.

Good letter to the WSJ on mandatory arbitration

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This letter spells it out so that even the WSJ should understand:

“Party at Joan’s”
Wall Street Journal, November 17, 2007; Page A9

Your Nov. 7, broadside (“Party at Ralph’s”) on arbitration was baseless. We oppose mandatory not voluntary arbitration requirements buried in the fine print of consumer contracts  because they shred consumers’ legal rights in favor of a secret,  expensive, business-dominated system.

The consumer attorneys attending a reception at Public Citizen’s office are legal aid and private attorneys who toil in some of the least glamorous corners of the law. They see firsthand the unfairness of this industry-created system to avoid accountability. They work for consumers harmed by home foreclosures, truth-in-lending violations, unfair debt collection practices, predatory lending, auto dealer fraud and other marketplace abuses.

To acquire a credit card, buy a home or car, open a bank account, use a cell phone or get cable television, consumers usually must sign a contract mandating arbitration to settle disputes. A mere signature effectively eliminates their constitutional right to the public courts, extinguishes the right to appeal, favors corporate repeat offenders whom arbitrators want to please and imposes substantial upfront costs.

“Studies” to justify mandatory arbitration, often cited by industry, misleadingly lump together people who voluntarily enter arbitration with those given no choice. In contrast, Public Citizen’s recent report evaluated 34,000 consumer mandatory arbitration cases in California. The results: Consumers lost 94% of the time.

No wonder the Journal editorial page and the paper’s business advertisers love this stacked deck. Your justification for it rests on the deeply flawed Tillinghast Tower Perrin report on the cost of litigation. Yet Tillinghast admits its numbers are not actual costs: Almost a quarter are for insurance industry administrative costs, and most are associated with auto insurance. Conservative jurist Richard Posner challenges Tillinghast estimates as “fictitious.”

Amazingly, the Journal, which lauds a free market, opposes the Arbitration Fairness Act, even though it would allow consumers to freely choose or reject arbitration and not be coerced into it. Congress should move quickly to enact the bill.

Finally, please note that Ralph Nader left Public Citizen more than 25 years ago, during which time I have led the organization, which has grown into a potent force for consumer good. Thus, in the future, please reference our events as a “Party at Joan’s.”

Joan Claybrook
Public Citizen
Washington, D.C.

Written by Leisureguy

21 November 2007 at 6:16 pm

Posted in Business, Daily life, Media

Tagged with ,

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