Thursday, April 17, 2008

Repeat Player Advantage

"An organization that helps resolve disputes between credit-card companies and their customers has been accused of disregarding the rights of consumers and favoring lenders in a lawsuit filed last month by the San Francisco city attorney. ... Companies such as credit-card issuers often prefer to resolve disputes with their customers through private arbitration, handled by one or a few lawyers known as arbitrators, rather than in court, in an effort to save time and money. ... From 2003 through March 31, 2007, 18,075 consumers' arbitrations in California were resolved through hearings conducted by the NAF, according to the suit, citing data reported by the NAF. Thirty of the matters, or fewer than 0.2% were won by consumers. 'NAF is actually in the business of ... churning out arbitration awards in favor of debt collectors,' reads the suit. ... But many plaintiffs lawyers and consumer advocates say that consumers are often forced into arbitration without adequately consenting, and that their recoveries can pale in comparison to jury verdicts", WSJ, 7 April 2008.

0.2%, wow! I'm sure NAF arbitrators are scrupulously fair. Of course, we might be seeing the "repeat player advantage" at work., i.e., NAF arbitrators side with the credit card companies over consumers since they will have continuing business from the former and in all likelihood, never encounter a particular consumer again. With the track record like that, I hope California puts the NAF out of business, at least within California.


Anonymous said...

Fortunately for the card companies, most credit card agreements provide a huge advantage to the companies. Also, the company legal team, as well as the arbitrators know the rules, laws, etc, much better than the credit card holder. By accepting the card, one basically agrees to abide by the rules set forth by the card company. The arbitrators generally follow those rules, thus giving the card companies that astounding 99.8% success rate. Its not the judges, its the acceptance by the card holder of rules tremendously slanted toward the card companies that gets them.

Independent Accountant said...

99.8% 99.8%! Get serious. In the recent Cuban "election" Raul Castro got only 99.4% of the votes, Fidel, 98.4%, source,, 30 January 2008. Would the credit card issuers have IA perform 1,000 arbitrations for them? I doubt I would give them 998 decisions. I have seen sitting judges slant their decisions so as to secure arbitrations when they leave the bench. Or do you think I am incapable of seeing what is to be seen? As for the contracts, if they are so "slanted" that 99.8% is a reasonable success ratio for the credit card companies, they should be thrown out as "contracts of adhesion". Case closed.