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CU Backs Arbitration Reform Package

Monday, March 11, 2002


SACRAMENTO, CA – Consumers Union, the nonprofit publisher of Consumer Reports, announced its support today for a package of legislative proposals aimed at reforming the mandatory arbitration process in California. Consumers are increasingly forced to agree to mandatory arbitration when they sign contracts with businesses. The bills endorsed by Consumers Union are designed to curb some of the problems associated with arbitration that make it difficult for consumers to get relief when they have a dispute with a company over goods or services.
“Mandatory arbitration puts consumers at a distinct disadvantage and makes it more challenging to resolve complaints over illegal business practices and contract violations,” said Gail Hillebrand, a Senior Attorney with Consumers Union’s West Coast Regional Office. “These proposals begin to level the playing field for consumers and will help to protect against some of the worst problems associated with mandatory arbitration.”
When consumers sign contracts to obtain a credit card, health insurance, bank loan or other goods and services, they typically agree to mandatory arbitration in the event that they later have a dispute with the company in question. These contract clauses can prevent consumers from being able to seek relief in court.
Because the outcome of arbitration is kept private, it interferes with the development of consumer law and fails to provide the kind of deterrence that can be provided by individual or class action suits. Often businesses have close relationships with the dispute resolution provider organization that may create a conflict of interest. Arbitration can impede the quality and effectiveness of relief available to consumers.
Consumers Union announced its support for a number of proposals aimed at addressing some of these problems, including a measure by Assemblymember Darrell Steinberg, which curbs conflicts of interest between the arbitration industry and businesses involved in disputes, and a bill by Assemblymember Ellen Corbett, which requires that the outcome and results of arbitration be made public.
In addition, Consumers Union endorsed another proposal by Corbett, which eliminates the absolute immunity claimed by some in the arbitration industry for misconduct; a measure by Assemblymember Howard Wayne, which limits some of the fees consumers must pay to participate in arbitration; and a bill by Assemblymember Hannah-Beth Jackson, which enacts a “rest period” before judges may accept employment as an arbitrator after retiring from the bench. These proposals will be assigned bill numbers shortly.

Gail Hillebrand
Consumers Union, publisher of Consumer Reports, is a nonprofit testing and information organization serving only the consumer. We are comprehensive source of unbiased advice about products and services, personal finance, health, nutrition, and other consumer concerns. Since 1936, our mission has been to test products, inform the public, and protect consumers.