Why it should go [Rafael Mangual and Jarrett Dieterle, Investors Business Daily] And Thaya Brook Knight, Cato:
If customers were really upset about arbitration, it seems they would have presented a terrific market for a company that would offer them contracts free of arbitration clauses. The trade-off would likely have been slightly higher fees for their products to off-set the costs. That is, effectively the trade-off the new rule presents: no arbitration clause, but higher costs. To my knowledge, no one offered this trade-off. Given the competitiveness of the market, it seems that if there were customers willing to pay for a product, banks and credit card companies would have offered it. The fact that no one did suggests to me that arbitration clauses are not that important to consumers. Not important enough, at least, to justify higher costs. This makes the rule a bit strange. It forces on consumers an option they never chose, all in the name of protecting their best interests.
12 Comments
One huge reason it should go–it will force consumers to deal with class-action lawyers.
A writer for Cato is being obtuse, no surprise.
No individual wants to sue the companies he/she contracts with. On the other hand, all consumers want a mechanism that encourages companies to not use illegal or unethical methods to nickel and dime them.
Frankly, the $4 I get from a class settlement is irrelevant. Rather, it is the deterrent effect that these class actions have on companies that is important.
Allowing companies to force arbitration agreements is a moral hazard. Eliminate the moral hazard and no-one will care about forced arbitration.
>A writer for Cato is being obtuse, no surprise.
We love you too.
The in terrorem effect is a legitimate policy consideration. But it’s likely counterbalanced by the fact that class action lawyers are out for #1, and the CFPB’s rule involuntarily forces consumers into relations with the class action lawyers.
The other problem—how do you trust Cordray as an honest broker–he’s a partisan Democrat, and trial lawyers put millions into the coffers of the Dem party.
I’m not sure that’s valid. Even if you sign a class-action waiver for every transaction you do for some reason (and no consumer goes around doing that), you could still be part of some class for some environmental hazard or something. But in any case, it was my understanding that you can opt out of a class action, so you still aren’t really forced into relations with the lawyers.
Allowing companies to force arbitration agreements is a moral hazard.
Damn those contracts and agreements that people willingly sign!
Score!
well, yeah. It is within the power of any individual to do without a cell phone until their position in the marketplace ( an individual wields 0.0000005% of the American market) brings the telecom industry to its knees. You first.
I wasn’t aware that anyone had to “bring [an industry] to its knees” in order to start a competing company.
And here I had a better mousetrap all set to market..
“it forces on consumers an option they never chose, all in the
name of protecting their best interests.”
Where have we heard this before …… ?
Sounds like something else that passed about the same time,
this involving health insurance, something that also needs
to be FULLY repealed . . . oh, yeah, now I remember: the
404/Obamacare/the “Affordable Care Act”.
Only fair to ask how many products and services we now use, individually quite inexpensive, that never would have come to market without arbitration clauses – since the cost of defending even a small number of individual litigation claims would consume the profits generated from thousands of sales…
I guess we can live without all of them, “for our own good”, just in case a few should ever decide to sue over a bad experience with them, where arbitration was previously available…
Since I feel that mentions of the ACA are a nonsequitur, I propose that we can move the health insurance companies into litigation insurance and make health care single payer. The actuaries could evaluate business plans to underwrite.