Arbitration clauses are depriving consumers of their rights, June 2012 NACA survey, Consumer claims suppressed by companies’ increased use of forced arbitration clauses, 84% of attorneys had rejected a client with a meritorious claim because of an arbitration clause


From NACA, National Association of Consumer Advocates, June 23, 2012.

“A June 2012 survey by the National Association of Consumer Advocates (NACA) demonstrates:
pre-dispute arbitration clauses are depriving consumers of their rights; fewer cases are
being brought as consumer claims are suppressed by companies’ increased use of forced
arbitration clauses.

According to NACA’s survey of nearly 350 consumer attorneys, it is clear that private arbitration
does not compare at all well to our nation’s traditional justice system. Consumers have lost the
opportunity to assert their rights under many state and federal consumer protection statutes
because of pre-dispute binding mandatory arbitration. Arbitration clauses are often entered into
without consumer knowledge of the fact that they have signed away their rights. As a result,
many consumer cases won’t move forward if the underlying contract has an arbitration clause in
it. In responding to the survey, many consumer lawyers note that in the last year since the
Supreme Court’s decision in AT&T Mobility v. Concepcion[1], consumer attorneys are observing
that courts summarily approve motions to compel arbitration and dismiss cases if there is an
arbitration clause, even where there are clear abuses and violations of the law and without
examining the merits of the case[2]
The presence of an arbitration clause in a contract, particularly one that includes a waiver of the
consumer’s right to join in a class proceeding, means that consumer claims will be suppressed.

For consumers who don’t understand what arbitration is or who do the cost benefit analysis and
decline to pay arbitration fees or travel long distances to arbitrate their claim, it means that
companies get a free pass as many consumer claims do not move forward as a class action or in
arbitration. This survey demonstrates – through consumer lawyer experiences and stories of
their experience representing or turning away consumers – that arbitration is having a claim
suppressive effect and many consumer claims will never be heard. Instead of leveling the
playing field, as proponents of arbitration claim the process does, consumer attorneys believe
that arbitration clauses are becoming exculpatory. Many, many good claims are simply lost and
never brought to justice.

Surveys of Consumer Attorneys
NACA surveyed lawyers in 46 states who regularly represent consumers in disputes against
businesses. To reach consumer lawyers, NACA used a segmented membership roster of both the
National Association of Consumer Advocates and the American Association of Justice.
Outreach was made to attorneys who represent consumers both as individuals and in class
actions, and across a wide range of consumer protection issues. Over seven hundred consumer
attorneys were contacted by email with a link to the survey questionnaire. The survey was
completed by almost 350 consumer lawyers.

The NACA survey included questions that called for both experiential and perceptual
responses about the practice of consumer law and practitioner experience with and perception of
pre-dispute arbitration clauses. Specifically, questions were asked about attorney’s willingness
to represent consumers when pre-dispute arbitration clauses were present , the likelihood of those
claims being pursued at all, the, pre-adjudication resolution potential and anticipated outcomes
of these claims , and the cost and fees of pursuing a matter through the arbitration process. The
Survey also asked respondents’ opinions about the advantages and disadvantages of arbitral and
judicial forums.”

“Consumer Lawyer Perceptions about Arbitration
Consumer attorneys were then asked about the principal advantages and disadvantages of
arbitration versus the judicial system. Though a significant number (45% of survey respondents)
identified some advantages to arbitration (speed, simplicity or lower cost), the majority of
respondents (53%) answered that there were no advantages of arbitration. As one respondent put
it: “I have seen NO advantages [to arbitration] — most consumers when faced with arbitration
costs choose to avoid the costs and conclude the case[.]”
By contrast, when asked about the disadvantages of arbitration contrasted to litigation, the
overwhelming majority of consumer attorneys responded that arbitration was wholly
disadvantageous to the consumer, with specific problems identified as: an uneven playing field,
limited recourse for the consumer, questionable objectivity of the arbitrator and lack of
transparency in the arbitration process. See chart below in Appendix I.”

“Consumer attorneys were also asked about the claim suppressive effects of arbitration.
Specifically, respondents were asked if they had ever turned down a meritorious consumer case
(there was a clear legal claim of harm, statutory violation, or breach of contract), because of the
presence of an arbitration clause.

In other words, have they observed consumer claims being suppressed?
84% of all consumer attorney respondents answered that they had, in fact, rejected a
client with a meritorious consumer claim because of an arbitration clause.
Of those vast majority of attorneys who turned away good cases, the median number
of consumers they turned away was 10 cases, while 11% of survey respondents
reported that they had turned away as many as 90-100 cases because of an
arbitration clause.”

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