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Saturday, April 19, 2014

NY Times Criticizes Class Waivers in Arbitration Agreements

Class Actions v. Payday Lenders Use of Arbitration

Emily Bazelon in the New York Times writes "Getting rid of predatory lenders was a victory for the citizens of North Carolina but the larger question of the right of companies to limit customers’ ability to sue for bad practices has not been rectified" due to the Supreme Court's AT&T v. Concepcion decision.

As Bazelon explains, "Only the Supreme Court can reverse one of its rulings, but Concepcion is based on a statute, which Congress can change. Senator Al Franken, of Minnesota, introduced a bill to bar mandatory arbitration, and even if Congress stalemates, the C.F.P.B. has the power to issue its own regulations on some arbitration claims." 

The phrase "mandatory arbitration" is worth attention.  As University of Kansas Law Professor Chris Drahozal writes:

A frequent criticism of arbitration in consumer contracts is that it is “mandatory.” The criticism is rhetorically powerful because viewing arbitration as “mandatory” is contrary to the whole idea of arbitration: that it is the product of an agreement between the parties. But as Richard Speidel explained, this label is “misleading because it connotes arbitration that is compelled by law regardless of consent.” Arbitration is mandatory when required by law, such as mandatory arbitration of public-employee grievances. No law requires that parties to consumer contracts arbitrate disputes.

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