Trump gives big banks arbitration, gives consumers a big setback.

Dave Marash
Nov 29, 2017 · 3 min read

Full Podcast:

In his ballad of the Depression Era outlaw Pretty Boy Floyd, Woody Guthrie sings…“as through this world I’ve wandered/I’ve seen lots of funny men;/ Some will rob you with a six-gun,/And some with a fountain pen.”

Back in Woody’s day, maybe 80 years back from ours, both kinds of robbers would have eventually wound up in court. Not today.

Today, the gunslingers still wind up in the criminal justice system, being confronted by prosecutors, judges, juries and the threat of prison, while the fountain pen wielding thieves take you to arbitration.

I know. Nobody uses fountain pens any more, but as Jessica Silver-Greenberg reported in the NY Times, more and more corporate defendants are getting binding arbitration. “Over the last few years,” she wrote, “it has become increasingly difficult to apply for a credit card, use a cellphone, get cable or Internet service, or shop online without agreeing to private arbitration. The same applies to getting a job, renting a car or placing a relative in a nursing home.

Graphic by Amy Marash, public domain. please use with credit

In America, the world of private Arbitration is run, from case filing to case closing by the American Arbitration Association, and according to their own statement of principles, it runs things any old way it wants. All cases, and the AAA does administer almost all arbitration cases in this country, “shall be settled by arbitration administered by the American Arbitration Association in accordance with its Commercial [or other] Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.”

There’s a lot of legal language in that little less-than-a-paragraph. The AAA issues “judgment[s]” that can be “entered in any court.” But based on what? Not “law.” Law is the one key legal term missing from the AAA proclamation. Which is because, as the AAA puts it, its cases are settled “by the American Arbitration Association in accordance with its Commercial [or other] Arbitration Rules.”

In the un-court of arbitration, there’s no law, just arbitration rules.

Your beef with a commercial or financial establishment is going to be decided by “Commercial Arbitration Rules.” Or not. Maybe they’ll be decided by “other Arbitration Rules.” Either way, I’ll bet you wish you could make your case for corporate abuse in a regular court of law.

In a recent poll, 95% said they would prefer a court to arbitration. Oh, and 89% said they want the right to join in class-action lawsuits to take on big corporations like, say, Wells Fargo Bank or Equifax.

Well the 95% and the 89% have been done in by the Trump Administration and Republicans in Congress. They just combined to roll back a rule about to be enforced by the Consumer Financial Protection Board, a rule that would have sharply reduced compulsory arbitration and boosted the right to class-action litigation.

What does this mean: here’s the translation from Massachusetts Democratic Senator Elizabeth Warren: the restoration of compulsory arbitration will “make it easier for financial institutions to cheat people.”

Oh people, 95% for courts not arbitration people, 89% for class-action lawsuits people, 70% against Dreamer deportation, and 70% against outright repeal of Obamacare people, I hope you’re keeping score.

Full Podcast: