by Jeff Sovern
In its report, the CFPB noted that there were just 52 arbitration claims under $1,000 in 2010 and 2011, and consumers won relief in just four of them. Says [Deepak] Gupta: “What this report shows is not that claims go to arbitration but that they simply go away.”
Alan Kaplinsky, an attorney with Ballard Spahr who helped pioneer the use of arbitration clauses in financial contracts, counters that consumers resolve claims in other ways. They call the company to complain. They go to the Better Business Bureau. “That’s why you don’t see a heck of a lot of arbitration or litigation when there’s a clause,” he says.
I'm skeptical about Kaplinsky's claim, because a lot of research, beginning with Best and Andreason's seminal article, Consumer Response to Unsatisfactory Purchases: A Survey of Perceiving Defects, Voicing Complaints, and Obtaining Redress, 11 Law & Soc.Rev. 701, 728–29 (1977), shows that dissatisfied consumers mostly do not complain to either the offending business or external agencies like the BBB. Mostly, they don't do anything. If Alan has evidence to substantiate his claim, I hope he will make it public.
But even if his claim is true, it's hard to see how it helps to defend arbitration. If consumers benefit so much from arbitration, as Kaplinsky claims, why do consumers with arbitration clauses in their contracts prefer the Better Business Bureau? Why don't they just use arbitration? Does the benefit of arbitration derive from the fact that it drives consumers to use something else to resolve disputes?