PEW-IE Survey Distorts Arbitration Debate

August 19, 2016 at 8:49 am Leave a comment

I’m more than a little surprised by the amount of attention research released earlier this week by the Pew Charitable Trust is getting.  Survey results indicate that overwhelmingly consumers across genders, generations and the political spectrum want access to the legal system and believe that banks should not be allowed to deny it.

Incidentally, the Web page reporting the results provides a link for persons to support the CFPB’s proposed regulations forbidding financial institutions from including arbitration clauses that forbid consumers from joining class action lawsuits.  What a coincidence. 

Its survey of 1008 people reveals that 95% of respondents want to be able to be heard by a judge and jury if they find out that they have been charged a fee for a service for which they are sure they didn’t sign up.  Keep in mind that the opinions I express are mine and mine alone, Pew does some great work, but this one really misses the mark. 

First, the premise of the question is all wrong.  Of course, 95% of respondents want access to the courts, just as I am sure they’d like the option of buying a Mercedes-Benz.  But the real question is if they could choose between a system that encourages swift, equitable and cost-effective solutions or one in which trial lawyers can potentially make millions of dollars for settling similar cases while the class member receives almost enough money to go to the movies, which would it be?

What annoys me so much about the arbitration debate is not the attempt to deal with arbitration’s inequities, but the CFPB’s pig-headed belief in and glorification of a class-action system that is far from perfect and at best is a very crude instrument to incentivize consumer protection.  For instance, legal fees based on a percentage of the amount awarded to a class of plaintiffs creates an incentive for attorneys to settle before trial so as not to run the risk of getting nothing for their efforts.  Furthermore, I don’t believe that the vast majority of consumers are anxious to go to court every time their financial institution does something they don’t like.  What they want is to be treated fairly and equitably. 

This is why I continue to believe that there is a middle ground in this whole debate.  Financial institutions should be able to mandate that disputes get settled through arbitration as opposed to class action.  But only if the arbitration provisions provide basic due process protections.  Courts reviewing these protections should have more flexibility to invalidate arbitration findings based on inadequate due process.  Unfortunately, both sides are speaking past each other with the only result being that the only big winners in this whole dispute will be plaintiffs’ lawyers.

Anyway, for the type of changes I’m talking about, Congress would have to act.  It’s so much easier to simply have the CFPB handle consumer protection on its behalf.

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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