Are Aribitrators Punished By Credit Card Companies For Ruling In Favor Of The Consumer?

According to a study by the Christian Science Monitor, the top 10 most used arbitrators ruled for consumers only 1.6% of the time, as opposed to 38% for those who were not dependent on arbitration fees.

What’s the deal?

Elizabeth Warren at Credit Slips says,

“The credit card companies keep track of how arbitrators rule, and they can strike those they don’t like. Customers don’t have a big information base about how the arbitrators ruled in the past, and they end up with whatever arbitrator the companies pick. It is just one more way the deck is stacked against ordinary consumers.

Consider the story of Harvard Law Professor Betsy Bartholet. In her first few cases, she ruled for the credit card companies, and she was asked to do more arbitrations. But once she ruled for a customer, her career as an arbitrator was over. As the CSM reports, sometimes the credit card company didn’t even bother to strike her–they just reported that she had a scheduling conflict. As a result, someone who might have listened to a customer’s story was always unavailable. Guess who was left to decide the disputes?”

Well, that certainly seems fair.

Why does this affect you? Because if you have a credit card you’ve most likely entered into a mandatory arbitration agreement—meaning that if the credit card company @%$#@$ you, you’ll need to use an arbitrator instead of going to court.

Sen. Russ Feingold (D) of Wisconsin and Rep. Hank Johnson (D) of Georgia have proposed legislation that would prohibit mandatory arbitration clauses in consumer agreements. The legislation would not prohibit arbitration, but it would give consumers a choice.

S. 1782 (PDF) [via Credit Slips]
Consumer advocates slam credit-card arbitration [CSM]


Edit Your Comment

  1. vladthepaler says:

    Alright, so say an arbitrator (arbitor?) rules against someone despite that person’s having a case… can’t s/he sue the arbitrator for making a judgement which doesn’t follow the law? I mean, arbitrators are required to rule within the bounds of the law, aren’t they? Or can their rulings just be (a ha!) arbitrary? (Is an arbitrator who rules arbitrarily called an arbitraitor?)

  2. anatak says:

    Great post. Anyone surprised by this? Did anyone think these companies didn’t have piles of data compiled and just waiting around to beat you up with. They’ve won the game, but its good to see the confirmation.

  3. acambras says:

    Isn’t letting the cc company choose the arbitrator the same thing as letting a defendant unilaterally select a jury (without any input from the opposition)?

    Still, I can’t say I find this surprising. The cc companies are trying to screw us again — what a shocker.

  4. banned says:

    I’m not surprised. What do people think would have happended? The clause clearly states an arbitrator of our choosing. Do we really think company hired arbitrators could be anywhere near independant? Imagine if they tried this crap over contracts for MLB players. Either way, like cellular contracts, these clauses have little teeth if you have an actual case. These clauses prevent frivolous lawsuits.

  5. sncreducer says:

    Aribitrators? Is that like an Arab Arbitrator?

    Seriously. Spell check. It’s not that hard.

  6. Crazytree says:

    as with most things, this is cyclical.

    the CC companies probably used neutral arbitrators at one time… but they’ve pushed the envelope too far… now the Democrats are going to push back.

    big surprise that the Republicans have been silent on this issue.

  7. anatak says:

    “now the Democrats are going to push back”

    Right. They’ll pass some more ‘non-binding resolutions’ and then go home and pretend like they actually made good on their campaign promises.

  8. ARP says:

    Vladthepaler- not really. Most cc agreements are binding arbitration. Meaning, you can’t appeal or argue the ruling in court. Obviously if there is clear error in law, you can probably get thrown out. But if the case is in the least bit grey, you’re stuck with the ruling.

    Often Arbitration agreements say that the parties mutually agree to the arbitrator from a list of approved arbitrators. It sounds like each party can strike one or more if they don’t like them. That’s the point, you have no idea about any of these people, so you end up agreeing to one. The cc knows everything about them, so they can pick who to strike and who not to strike.