What About This…? 11.13.2014

By Wayne William Cipriano

I heard about a new credit card the other day. One of the best parts of that new card is the opportunity to “opt out” of their arbitration offer.

What is that, you ask?

Arbitration is a method of settling disputes, frequently involving cus­tomers and financial organizations like banks, investment companies and credit card issuers. It is touted as a “swift, inexpensive, fair, effi­cient and socially considerate” alter­native to courts. The parties to the dispute appear before an arbitrator. Each party presents their argument and the arbitrator decides the best way to settle the dispute.

Sounds pretty good, right?

There are a few details that tend to capture one’s attention: First, lawyers are not required (but not barred). Second, the arbitrator’s decision is final. Third, the arbitra­tor is selected from a list provided to each party. You select the one you want, they select the one they want. If both parties cannot agree, the two arbitrators selected choose a third to hear the case.

Say you do not want to hire a lawyer (and save a few bucks), just present your own case but the insti­tution with which you have a dispute (XYZ, Inc.) can be represented by whomever they choose, including a person well trained in the law and skilled in the art of case presentation (lawyer?).

No matter how unfair, one-sided, even irrational you may think the arbitrator’s decision is, it is final, forever and completely unappealable anywhere.

However, it is the very use of the arbitrator that is the most problem­atic. How can you be sure you are getting a fair shake? In court, an elected judge is responsible to the electorate should that judge be seen as too friendly to either businesses or consumers. An appointed judge, insulated from elections, has no reason to favor one side or another, the chief argument for long-term appointments. A list of arbitrators can be long, but it is finite. You choose based on what? Nice name? You sure are not getting a list of all an arbitrators decisions and which if any side more often prevailed.

But the biggest problem of all is this: how often do you think you are going to use an arbitrator? Once? Twice? Three times in your entire life? How often does XYZ, Inc. use an arbitrator, especially when all of XYZ’s clients are by contract forced to use mandatory arbitration? Once a week? Ten times? Three hundred times a year?

Arbitrators are paid, no doubt, on the number and length of the cases they decide. If not chosen, they collect no fees. How can there not be a conflict of interest when one party to a dispute will use an arbi­trator three times in their lives, and the other use an arbitrator three times a week?

I would hope that arbitrators try to be as fair and unbiased as possible, but they are human like us all. They have families to feed and bills to pay. In court, judges recuse them­selves when even the merest possibility of a conflict of interest exists. In arbitration, how can such a conflict be avoided?

Any wonder why XYZ, Inc., or any other entity would require man­datory arbitration? And, if it is so “swift, inexpensive (the company always seems willing to pay the entire cost of arbitration!), fair, effi­cient, and socially considerate,” why don’t these companies offer volun­tary arbitration? Wouldn’t we jump at the opportunity to avoid the terri­ble experience of a case settled in court by a judge and perhaps a jury?

Could it be that this credit card company intends to treat its custom­ers so well that disputes will seldom arise, and when and if they do, both courtrooms and voluntary arbitration would be available to both the com­pany and the customer?

I think I will look into getting a credit card from them.