Who Wins if Arbitration Loses?
Ahead of the Senate Judiciary Committee’s hearing entitled “Small Print, Big Impact: Examining the Effects of Forced Arbitration,” AFSA wrote to Chairman Richard Durbin (D-IL) and Ranking Member Lindsey Graham (R-SC) in support of arbitration. AFSA – which has long supported arbitration as a fair and effective mode of settling disputes between borrowers and creditors – asked the members to not impose restrictions or limits on permissible arbitration, which reduces transaction costs and enables fair, speedy, and efficient dispute resolution.
Federal law has protected arbitration as a means of resolving disputes between businesses and consumers for nearly 100 years, and use of pre-dispute arbitration clauses in contracts benefits both consumers and businesses. Further, courts work to ensure that arbitration agreements of all types are fair and do not provide an untoward advantage to any party. Studies have long shown that consumers prevail more often, recover more money, and resolve their claims more quickly via arbitration than they do in litigation. The only clear winners of broadly eliminating cost-effective and fair arbitration as a viable way to resolve disputes are class action lawyers, who would directly benefit from increased class action litigation. The Consumer Financial Protection Bureau itself reported that class action settlements frequently provide, at best, a very low return to class members, while class action attorneys take in millions of dollars. Their windfall would come at the expense of consumers, many of whom are not even eligible to participate in class action litigation.
April 11th, 2024
