Friday, April 2, 2010

Urge your senator to support HB 379 - transparency in arbitration

This important legislation regarding transparency in arbitration has already passed the House and will having a hearing April 6 in the Senate Finance Committee. Please tell your senator that you support this important legislation.

MCRC's testimony follows:
Within the past fifteen years, corporations have moved towards requiring consumers to submit all legal claims to mandatory arbitration rather than having their day in court. Mandatory arbitration means that the consumer waives the right to sue or participate in a class action suit. The practice of mandatory arbitration has grown in every segment of the marketplace-home sales contracts, insurance companies, car rental companies, and car dealers.

Many employers now require employees to submit all claims (wage and hour, civil rights) to binding arbitration. When seeking medical treatment, patients are often required to sign mandatory arbitration clauses before receiving care. HMOs as well as hospitals use these clauses.

In short, mandatory arbitration binds the ways in which consumers seek redress with their employer, their health care provider, and with vendors who sell goods and services. Yet, consumers have virtually no access to information about the arbitrations and the groups that perform arbitration.

This lack of information represents a market failure. Without access to information about arbitration firms and individual arbitrators, the consumer has no way to determine whether mandatory arbitration would resolve any claims in an unbiased manner.

Corporations often contract with private arbitration firms and individual arbitrators to settle disputes. Not surprisingly, the firms and individuals develop close working relationships. Using California data, Public Citizen found that 90 percent of cases were funneled to about two dozen arbitrators. Another study by Center for Responsible Lending showed that the heavy repeat arbitrators were much more likely to rule for the lender.

The relationship between arbitrators and the firms that hire them call into question the fundamental fairness of mandatory arbitration.

Providing consumers with basic information about arbitration firms and individuals helps to level the playing field a bit. Corporations that require mandatory arbitration have this information available to them. Consumers should have the access to the same information as firms including: how many consumer arbitrations has an arbitrator handled, how often did the company prevail, the consumer, what was the average award, how many class arbitrations allowed, etc.

HB 379 will provide much needed transparency for consumers regarding mandatory arbitration. It is an important initiative to rectify a market failure by providing needed information to consumers to inform their decisions.
MCRC urges the Committee to issue a favorable report on HB 379 to provide consumers with the important information they need to inform their decision-making.

Respectfully submitted, 
 


Marceline White
Executive Director, MCRC

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