Tucked away in the Obama administration’s proposals for revamping regulation of financial services is a provision that would apparently allow federal regulators to curtail or eliminate the preagreed arbitration of consumer complaints in stockbroker and other financial service disputes, thus shunting more cases as litigation to the civil courts. [Erin Geiger Smith, Business Insider]. Max Kennerly has a plaintiff’s-eye view.
3 Comments
The companies have brought this upon themselves. There is nothing inherently wrong with arbitration, or even arbitration in consumer contracts. But there is something VERY wrong with the mandatory ones frequently made a part of these contracts. The fact is, most consumers can’t and don’t get a fair shake in the arbitration proceedings mandated by the contracts.
The provisions are almost uniformly more onerous on the consumer. They have inconvenient choice of law and forum, impose unreasonable costs (the parties share the costs of 3 arbitrators, anyone?), raise the risks by shifting fees, etc. Plus, the companies are inevitably repeat players, frequently selecting the same arbitrator(s) that then become reliant on those companies as a part of their income.
Every company I’ve ever worked for would never agree to the terms used in these arbitration provisions, so why would anyone think that they would be acceptable in a consumer context?
If companies were more careful about their mandatory arbitration rules, do you really think they would be so demonized?
Here we go. Would someone please “ping” our old pal Justinian to get his take on this?
[…] Overlawyered: Financial Services Regulation Overhaul – Goodbye to Arbitration? […]