Good afternoon.  I’m pleased to join my friends from Public Citizen in announcing the release of this eye-opening report.  The report provides solid evidence of the abuses that take place when consumers are forced into binding mandatory arbitration agreements. 

Arbitration is often touted as a more efficient and less expensive alternative to litigation.  That can certainly be the case, but only in situations where both parties freely choose arbitration on terms that ensure a level playing field.  Unfortunately, more and more companies are requiring people to enter into binding mandatory arbitration agreements as a condition to obtaining a job, a credit account, or a franchise.  The practice is so widespread, and individual consumers or employees have so little bargaining power in these transactions, that they are effectively forced to accept a mandatory arbitration clause.

The problems with forcing arbitration on consumers and employees are made crystal clear by this report.  The most glaring problem is that the playing field in these cases is anything but level.  An arbitration firm that receives millions of dollars in repeat business from a company has a powerful incentive to rule in the company’s favor.  And that is exactly what happens in a shocking percentage of cases.  We learn in this report that one arbitration firm in California ruled in favor of credit companies in 94 percent of the disputes it resolved.  Few consumers would voluntarily choose arbitration when faced with those odds.

Consumers who lose their arbitrations have little recourse.  Courts are allowed to reverse an arbitrator’s decision only in the most egregious cases.  The mere fact that the decision was wrong is not a sufficient basis for appeal.  That makes it easier for arbitrators to interpret laws in a way that favors the companies who are giving them repeat business.  Mandatory arbitration clauses thus threaten to undermine the statutory protections that Congress has so carefully provided for American workers, investors, and consumers. 

Fortunately, there is a solution, and this report points the way.  We need to restore choice to the consumer, and we can do that by enacting legislation that prohibits pre-dispute arbitration clauses in contracts between parties with unequal bargaining power.  In July of this year, I introduced legislation, the Arbitration Fairness Act of 2007, that would do just that.  The legislation is cosponsored by Senator Durbin and it has been introduced in the House by Representative Hank Johnson from Georgia.  Under our legislation, contracting parties would still be allowed to choose arbitration, but that choice would have to be freely made after the dispute arises.  It would no longer be presented to the consumers as a precondition of doing business – an offer they cannot refuse. 

This will help in two ways.  First, it will enable to consumers to exercise their right to go to court, if that is the route they choose.  Second, if consumers have the right to decline arbitration, arbitration firms that simply rubber stamp the actions of companies may find themselves out of business.  This legislation will ultimately make arbitration a more fair and desirable option.

I hope that Public Citizen’s excellent report serves as a wake-up call.  It’s time to restore choice to consumers and employees, and restore the effectiveness of the laws Congress has passed to protect them.  Thank you.