The Current State of Consumer Arbitration

Resident Fellow
Ted Frank
In 2007, the advocacy group Public Citizen issued a scathing report attacking the consumer arbitration process. This report, coinciding with more than a dozen pending antiarbitration bills in Congress, as well as lawsuits against National Arbitration Forum and credit card companies, provided support to many antiarbitration advocates' claims that consumer arbitration is bad for the "little guy," a conclusion repeated with little scrutiny by stories in Business Week and on Good Morning America. Academics and arbitral organizations responded quickly, providing arguments and statistics that suggest significant difficulties with Public Citizen's analysis of the available empirical evidence. Although problems with consumer arbitration exist, our review of the available empirical evidence suggests that claims by Public Citizen and others that consumer arbitration is inherently unfair to consumers are overstated.

In writing this article, we reviewed the available empirical evidence about consumer arbitration. We did not consider empirical findings related to employment arbitration because the two processes are different in many ways. More important, perhaps, analysis of employment arbitration data is probably no longer necessary to provide insight about consumer arbitration. California's requirement that various arbitral organizations collect data about their California consumer arbitration cases provides a rich resource from which to draw conclusions about the benefits and drawbacks of consumer arbitration. Public Citizen utilized this rich resource of consumer arbitration data in preparing its report on consumer arbitration. Public Citizen's analysis of the California data, which appeared to reveal many potential concerns about consumer arbitration, is, however, only one of a number of analyses of that data.

Our analysis of the Public Citizen report and evidence collected in California and elsewhere reveals different, and more positive, conclusions about the state of consumer arbitration.

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Ted Frank is a resident fellow at AEI. Sarah Rudolph Cole is the Squire, Sanders & Dempsey Designated Professor of Law at Moritz College of Law, Ohio State University.

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About the Author

 

Ted
Frank
  • Ted Frank is a former resident fellow at AEI. He specialized in product liability, class actions, and civil procedure while at AEI. Before joining AEI, Mr. Frank was a litigator from 1995 to 2005 and clerked for the Honorable Frank H. Easterbrook on the Seventh Circuit Court of Appeals. Mr. Frank has written for law reviews, the Wall Street Journal, the Washington Post, and The American Spectator and has testified before Congress multiple times on legal issues. He writes for the award-winning legal blogs PointOfLaw.com and Overlawyered, and the Wall Street Journal has called him a "leading tort-reform advocate."  Mr. Frank was recently elected to membership in the American Law Institute.

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