On June 2, I wrote a blog post, Opaque (formerly Dark) Patterns and Arbitration Opt Outs, arguing that arbitration opt outs are really opaque patterns. On June 8, Mark J. Levin of the Ballard Spahr firm replied in a post at the Consumer Financial Monitor Blog, Arbitration opt out provisions benefit consumers, Professor Sovern. But Mr. Levin, as best I can tell, didn’t actually identify a single way in which arbitration opt out provisions benefit consumers. He wrote that “scores of state and federal courts, both trial and appellate, have scrutinized opt out provisions in consumer arbitration clauses and found them to be fair and enforceable, rejecting contentions that they are procedurally and/or substantively unconscionable.” But it takes more than not being unconscionable or unenforceable to benefit consumers. Let’s get real: the reason the industry uses opt outs is to undermine claims that arbitration clauses are procedurally unconscionable so that their arbitration clauses are more likely to be enforced. In other words, arbitration opt outs benefit the industry, not consumers.
If arbitration opt outs really benefited consumers, we would expect to see consumers take advantage of them by, well, opting out. But do they? The industry knows how many consumers write them to opt out but, to the best of my knowledge, hasn’t released that information. No doubt if many consumers did opt out, the industry would trumpet that fact to support its claim. So here’s a challenge to Mr. Levin: prove that opt outs benefit consumers by telling us how many consumers opt out.
Mr. Levin compares opt outs from arbitration clauses to class action opt outs. While the two share some similarities, they are different in material respects. At the point at which a consumer opts out of a class, the matter has ripened into a dispute and the consumer can assess whether the consumer prefers to remain in the class or opt out. But arbitration opt outs invariably provide for a deadline early in the life of the contract, such as 45 days from the date of the contract in the example I linked to in my earlier post. That deadline means that the consumer must decide whether or not to opt out of arbitration before knowing what the dispute would be about or even if there will be a dispute. Thus, the consumer must decide whether to opt out of arbitration before the consumer can make an informed decision about the best way to handle the dispute.
Another difference: federal class actions are supervised by judges whose job includes protecting the class and making sure, for example, that settlements are “fair, reasonable, and adequate.” As for the fairness of arbitration proceedings, no doubt many arbitrators strive to be fair but then of course there was also the National Arbitration Forum, which the Minnesota Attorney General’s Office put out of the consumer arbitration business after learning of NAF’s connections to the debt collection industry, including debt collectors who had cases before the NAF. I wonder how many consumers wished they had opted out of NAF arbitrations but didn’t because they didn’t even know about the arbitration clause or understand it in time to make the decision. Here’s a bonus challenge to Mr. Levin: if arbitration opt outs benefit consumers, how about getting rid of the deadline and allowing consumers to opt out of arbitration when they know there’s a dispute–the way it works with class actions? How does having a deadline benefit consumers?
It would be good to also call out some of the dark patterns in the post-mass-arbitration notice of dispute procedures. AT&T for instance requires a notarized signature of a represented consumer to start the process, ostensibly for allowing account details to be shared with the attorney. Wal-Mart forbids all signatures except wet-ink signatures (possibly in violation of the E-SIGN Act?). A lot of these seem to be designed to hinder consumers (and, primarily, their attorneys) from accessing the process.
“How about getting rid of the deadline and allowing consumers to opt out of arbitration when they know there’s a dispute–the way it works with class actions? How does having a deadline benefit consumers?”
Presumably the response is that they don’t want consumers to cherrypick after-the-fact which disputes they want to have arbitrated versus disputes they’d prefer to have litigated.
This doesn’t explain why it wouldn’t be possible to allow opt-outs to be made at any time but only apply prospectively to disputes that haven’t already arisen.