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Arbitration looks better now, doesn't it?

The litigation lobby condemns the use of mandatory arbitration provisions in credit-card agreements to reduce the expense of litigation (and Dodd-Frank regulations are likely to end the practice, raising costs for honest consumers), claiming that the success rate of credit-card companies in arbitration supposedly demonstrates bias, but as a Sunday New York Times story points out, it's not like consumers fare better in court, where the default rules are considerably stricter than in arbitration. In litigation, a robosigner can obtain a default judgment 100% of the time; meanwhile, in arbitrations, consumers win partial victories nearly 20% of the time even when they have defaulted. This is something Sarah Cole and I pointed out in 2008. Alas, the New York Times story doesn't mention the possibility of alternative dispute resolution, and how Congress is acting to take that away.

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Rafael Mangual
Project Manager,
Legal Policy

Katherine Lazarski
Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.