Mandatory Binding Arbitration Clauses Prevent Consumers from Presenting Procedurally Difficult Claims

Abstract

The longstanding debate over the benefits and detriments of mandatory arbitration in the consumer context has often focused on the wrong issue. Although we have now argued for almost twenty years over whether it is appropriate to require consumers to arbitrate rather than litigate claims against providers of products and services, too often commentators have asked whether consumers win or lose when they bring claims in arbitration, rather than whether consumers’ claims are suppressed or eliminated altogether as a result of companies’ use of mandatory arbitration clauses. The United States Supreme Court’s recent decision in AT&T Mobility v. Concepcion brings this claim suppression issue to the forefront by allowing companies to use arbitration clauses to insulate themselves from exposure to plaintiffs’ class actions.

While some urge that the elimination of consumer class actions is no big deal, in that consumer arbitration offers a more effective way for consumers to resolve their claims than do class actions, this Article suggests this analysis is deeply flawed. Although some 'procedurally easy' claims may effectively be resolved through individual arbitration (in actuality they are far more frequently resolved through complaints to customer service or through credit card chargebacks), 'procedurally difficult' claims cannot typically be resolved on an individual basis. 'Procedurally difficult' claims are those in which the consumer does not realize she has potentially been injured; the consumer does not realize that an injury she has suffered may be legally cognizable; the consumer’s claim is difficult and expensive to present, relative to the anticipated recovery; or the consumer seeks injunctive or other group relief. Claims for discrimination or fraud or regarding tainted food may often be procedurally difficult. While recognizing that, in theory, government agencies could protect consumers with procedurally difficult claims, the Article finds that in the United States such agencies are not sufficiently well-funded to protect many consumers. Thus, the Article concludes that Congress and/or administrative agencies such as the Consumer Finance Protection Board need to step in to protect consumers with procedurally difficult claims and assure they receive the legal protection they have been promised by our substantive laws.