Several people who are interested in the NAF settlement (see here) and the recent commentary to a Congressional Committee (see here) have been discussing these things in an interesting an email exchange. I’ve asked permission to put a few comments up here on the blog, and will see if I can’t get permission for more.
Here’s a take from Dwight Golann, law professor at Suffolk University.
It seems that the Searle report offered to the Kucinich Committee and the criticisms of the NAF’s credit arbitrations have a “ships passing in the night” quality. The Searle report was based only on AAA arbitrations. Of the 300 AAA cases surveyed, only 61 were consumer arbitrations and of those, 15% (a total of about 9 cases) involved credit cards or other lenders. The outcomes of 9 AAA cases is not enough of a sample to critique an analysis of thousands of NAF consumer credit cases, but I suspect that the AAA would do well even in a credible sample.
In 1994, at Frank Sander’s request, I wrote a “pro consumer arbitration” piece as part of a pro/con dialogue for DR Magazine. Pat Sturdevant wrote the response, and it turns out that she had the better of the argument. Consumer arbitration can work, and at the AAA and JAMS I’m willing to believe it does work, in part because the AAA seems to deal with businesses that have relatively few arbitrations per year and so cannot offer great monetary incentives to administrators or favored arbitrators. However creditors with thousands of cases per year will, inevitably, seek to get the best possible results from any system.
It’s sad that the whole field of arbitration, and perhaps also the field of ADR that I love, is being tainted by a scandal we could have foreseen. Gina Brown asked me to contribute a comment on the NAF decision. I ended by quoting an adage: Regulation is the price we pay for the failure of morality.