Relates to arbitration organizations

• Democratic6

◆ The sponsor's argument

Why Brian Kavanagh says this is needed

The proliferation of binding mandatory arbitration clauses in consumer contracts, including contracts for credit cards; telephone service; home loans; health care; and consumer goods, over the past twenty years has led to a significant increase in the number of consumer disputes referred to arbitration. The vast majority of these proceedings are handled by arbitrators working for private organizations that administer arbitration programs for private businesses. In recent years, consumer advocates have raised concerns regarding the fairness of private arbi- tration proceedings. Many advocates maintain that consumers may not be able to get a fair hearing since an arbitrator has a financial incentive to rule in favor of the businesses paying for his or her services. According to a 2007 report issued by Public Citizen, between January 1, 2003 and March 31, 2007, arbitrators working for one of the largest private arbitration organizations ruled in favor of businesses in nine- ty-four percent of the cases involving California residents that it examined. The report also found that: In one fiscal quarter, an arbitra- tor working for a large private arbitration organization handled eighty cases brought by banks against consumers, and ruled for the bank in all eighty cases. In all of the cases, except two, she gave the bank one hundred percent of the amount it claimed. Another arbitrator working for a large private arbitration organization handled sixty-eight cases in a single day for an average of one every seven minutes, assuming an eight-hour day-and ruled for the business in every case, awarding one hundred percent of the claim. According to Public Citizen, the same arbitrator is an attorney with his own practice serving business and corporate clients. In several cases, arbitrators from a large private arbitration organiza- tion entered awards in favor of a large national bank and other lenders against identity theft victims who did not, in fact, owe any debts. Arbitrators who rule against businesses and in favor of consumers have been known to be blackballed from serving as arbitrators in future cases. This bill would shed light on the private arbitration industry and provide for greater accountability for private arbitration organizations by requiring such organizations to collect and make available to the public basic data regarding the nature and outcome of consumer arbi- trations. This would ensure that consumers who are given the choice of pursuing a claim in the courts or in arbitration are able to obtain access to relevant information, such as the number of cases a private arbitration organization has handled for a particular business and whether the business or the consumer won most of those cases. The bill would also help to improve fairness in arbitrations for consumers forced into arbitration pursuant to a contract containing a mandatory arbi- tration clause.

This is the sponsor's own case for the bill, quoted from their memorandum. It is not Agora's description of what the bill does.