The future of consumer arbitration is uncertain with this week's developments.
Let's start with the National Arbitration Forum. NAF is (was) set up to arbitrate disputes between consumers and credit card companies. Earlier this week, NAF agreed, as part of a settlement with the Minnesota Attorney General, to cease administering arbitrations of consumer credit card disputes as of July 24, 2009. Versions of the story and settlement can be found here and here.
As part of this fallout, the American Arbitration Association announced that it will not participate in consumer-based arbitrations until new guidelines can be developed. Here's the Wall Street Journal's story and here's the release from the AAA.
On Wednesday, JP Morgan Chase announced that it would no longer engage in arbitration for credit card disputes and was examining its consumer contracts. Here's the link to that story.
With two major arbitration outfits leaving the field, and one major creditor leaving the field, what will the future look like?
While hard to tell, my initial thought is that consumer credit card disputes will be filed in courts instead of arbitration forums. That means more work for judges with heavier caseloads and more opportunities for mediators who will have access to these types of disputes that they didn't have before.
It may also lead to a larger break-up of mandatory arbitration of all consumer disputes, not just credit card disputes. There are a number of critics of arbitrating the consumer dispute (as well as a number of supporters)--too many to list them here (hint: Google "consumer arbitration unfair" for about 101,000 hits on the subject; "consumer arbitration unfair" yields about 130,000 hits). An excellent analysis of the pros and cons of consumer arbitration can be found here, a report by the Searle Center at Northwestern University Law School.
