When whistleblowers step into the limelight, many do so only hesitantly. But when West Virginia’s former Supreme Court Justice got fed up with arbitration practices that gave all the wins to credit card companies, he came out with guns blazing. His conclusion? The credit card companies “have converted apparently neutral arbitration forums into collection agencies to extract the last drop of blood from desperate debtors.”
Another whistleblower backs him up. My colleague, Harvard law professor Elizabeth Bartholet, testified under oath in a deposition for a consumer who is suing to avoid on a lawsuit to getting sent to arbitration. Professor Bartholett explains her experiences as an arbitrator in credit card disputes. So long as she ruled for the card companies, they kept using her. But once she ruled against a credit card company, all her pending cases with that company were sent to someone else, with notes to the consumers that she had a “scheduling conflict”–an outright lie.
The title of the judge’s new article says it all: Arbitration and the Godless Bloodsuckers.
Buried in the fine print of many credit cards and other consumer contracts is a provision that requires any customer with a dispute to go to arbitration. For technical legal reasons, arbitration clauses typically destroy the possibility of class actions, which is one reason they are attractive to credit card companies. If every single consumer has to bring a separate lawsuit for something the card company does wrong, then the odds of a company’s having to pay out for wrong-doing is substantially lessened.
But even most critics of arbitration clauses have assumed that the arbitration itself is fair. After all, arbitration was supposed to be the cheap, accessible alternative to expensive litigation. Now come two devastating reports from former arbitrators who blow the whistle on the National Arbitration Forum. Both explain that once they ruled against a credit card company, they were blackballed. Both explain how the system is set up so that repeat players can dump all the arbitrators who might rule for the customer. By their accounts, arbitration is nothing more than another way for “Godless Bloodsuckers” to cheat customers.
The two whistleblowers are powerhouses: a retired judge and a respected law professor. Law professors over on www.creditslips.org are picking up the story.
It would be good to look at the data, to evaluate arbitration cases the way we evaluate court cases to see who wins and who loses and what factors seem to make a difference over time. But the National Arbitration Foundation is fighting hard to keep all its information secret, even when the data are stripped of personally identifying information.
Twenty years ago, policymakers had high hopes for what arbitration might accomplish. But these stories from ex-arbitrators suggest the system has been completely corrupted. How about a hearing on consumer arbitration clauses as the first item of business for the new Congress?
