Comparing arbitrators’ claims with empirical data

On the same day that National Arbitration Forums posted a report describing “facts about the fairness and affordability of arbitration,” the Public Citizen posted a report detailing the harm done to consumers by mandatory binding arbitration clauses. Summary, full report (PDF).

Not only does the Public Citizen report poke giant, gaping holes in NAF’s fallacious report, it goes on to show exactly how inequitable arbitration really is for consumers. NAF claims that “Consumer outcomes in arbitration are the same as in court. Every published study and all empirical data indicate consumers prevail at a rate that is greater than or equal to litigation, where similar subject matter is at issue.” NAF must have overlooked the Public Citizen report, which found that consumers lose approximately 95% of arbitrations. Consumers do not lose so often in court.

The Public Citizen report also found that arbitration is more expensive than court, although NAF claims that “Arbitration is significantly less expensive than court.” In fact, when the consumer does pay, the fee is often a “sliding scale” where the consumer pays more the more money the claim involves.

The best part of the Public Citizen report may be its examination of the arbitration awards by all-star California arbitrator Joseph Nardulli, who has handled a whopping 1,332 arbitrations for NAF and awarded over 15 million dollars to corporations. Consumers prevailed in only 1.8% of Nardulli’s arbitrations. This is hardly surprising, since Nardully has decided as many as 68 arbitrations in a single day. I can picture him humming along, signing away thousands at a stroke of his pen without doing even a cursory analysis.

In sum, NAF is full of hot air, and arbitration is rarely in a consumer’s best interest. NAF is basically a tool for the debt collection industry, and virtually a debt collection agency itself.