Consumer Law

Obama Administration straddling fence on forced arbitration?

By Kia Franklin

Where does the Obama administration stand on the issue of forced arbitration? Apparently, with one foot on each side of the line.

Consumerist shared clips from their entertaining and informative interview with Austan Goolsbee, President Obama's senior economic adviser, about consumer protection and credit card industry reform. The interview is presented in a four part series, and here are links to the first, second, and third parts. I want to highlight part four because it deals with an issue that has been the subject of so many posts and debates on TortDeform. That's right, part four discusses pre dispute binding mandatory arbitration (bma), also known as forced arbitration.

The good folks at Consumerist ask Goolsbee where the Obama administration stands on the issue of forced arbitration and whether there could be room to include an anti-bma provision to the Credit Cardholders Bill of Rights. The answer leaves much to be desired. Here's the Consumerist clip:

His answer... well, isn't one. Goolsbee acknowledges that things like institutional bias and the repeat player effect sound very problematic, but he does not give a firm answer against or supporting the use of arbitration. In fact, he even uses the old "flood of litigation" standby to argue a supposed benefit of forced arbitration. But when companies systematically abuse consumers through an unfair form contract provision that pervades the entire industry, stemming the tide of legitimate consumer lawsuits is not a good thing. Instead, this enables the credit card industry to continue and profit from abusive practices, without the accountability of the law.

To be fair, Goolsbee does seem open to information about the abuses of forced arbitration, but the truth is that tons of concrete information is already out there. You've got the FairArbitrationNow Coalition (of which I am a member). You've got Public Citizen's many groundbreaking reports. And DMI has our own report that discusses forced arbitration. Additionally, dozens of consumers from across the country recently traveled to DC to share personal stories about the arbitration system, so the administration can ask the people themselves.

It is acceptable, and preferable over simply fudging an uninformed answer, to admit when one is undecided on a particular issue. But people in positions of influence, when presented with information that demonstrates the urgency of the issue, have a professional obligation to get informed and then take a stand. This must involve talking to advocates and real people affected by the issue, not just credit card industry reps. And that's what we should be calling on Obama's economic advisers to do, soon.

See DMI's prior coverage of The Credit Cardholder's Bill of Rights and the Credit Card Accountability, Responsibility, and Disclosure Act

Full post as published by TortDeform.com on May 20, 2009 (boomark / email).