FOR IMMEDIATE RELEASE
June 28, 2017
CONTACTS:
Amanda Werner, Americans for Financial Reform & Public Citizen, awerner@ourfinancialsecurity.org, (202) 973-8004
Jan Kruse, National Consumer Law Center, jkruse@nclc.org, (617) 542-8010 ext. 361
New Report Shows Need for Federal Oversight of Secret Arbitration: All Firms in Flagrant Violation of California’s Disclosure Law
A major new report released today found that private arbitration firms that decide claims against corporations accused of fraud, sexual harassment, wage theft, abuse of nursing home residents, and other illegal activity are themselves violating the law. Each firm failed to fully comply with a California law meant to bring transparency to these secret proceedings by requiring firms to disclose basic information about the claims filed and their outcomes.
The report was written by the Public Law Research Institute (PLRI) UC Hastings College of Law, which pored over records, analyzed data, and contacted arbitration firms directly as part of its investigation into whether compliance had improved since the PLRI issued its earlier report in 2013.
Key findings:
• No firm discloses all of the required information for all of its cases
• Out of 32 firms that offer arbitration services in California, only 3 provide information that is readily accessible on the home page of their website, and is searchable and sortable, as required by law
• 9 arbitration firms do not provide any data at all, and claim they are not required to comply with the law. However, at least one of those firms’ websites promotes its arbitration services as an alternative to small claims court
• The American Arbitration Association, which has closed 1021 cases in California since 2014, fails to provide required information about the prevailing party in most cases where there was a hearing and an award (reporting the prevailing party in only 46% of such cases)
• The Kaiser Office of the Independent Administrator reports 98 arbitrated cases since 2014; of those, the non-Kaiser party prevailed only 6% of the time
• Despite the greater efficiency touted by proponents of arbitration, the report notes the interval between filing and disposition of cases ranging from 150 days to more than 350 days for the major arbitration firms
“These findings demonstrate the need for strong federal oversight of these secret arbitration proceedings,” said Amanda Werner, arbitration campaign manager with Americans for Financial Reform and Public Citizen. “Without agencies enforcing strong rules, corporations can simply opt out of state law and, in fact, gain a competitive edge in the marketplace by harming consumers and workers.”
The Consumer Financial Protection Bureau proposed a rule last year that would create a public record of claims and outcomes in individual arbitration related to financial products and services, ensuring bad actors cannot hide illegal behavior in secret proceedings. The rule would also restore the right of consumers to join together in class action lawsuits by restricting some uses of forced arbitration.
“This report shows why we need the CFPB rule to lift the veil of secrecy over forced arbitration, which helps companies sweep their wrongdoing under the rug and evade our right to an impartial court,” said Lauren Saunders, associate director of the National Consumer Law Center.
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