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current economic conditions. This leaves consumers without emergency liquidity that they relied on when
they are most vulnerable.
Figure 8: The Impact of the Identity of the Plaintiff on Arbitration Results
Percent of Amount Requested
Awarded to Plaintiff
The Impact of the Identity of the Plaintiff on
Arbitration Results
91% 95%
100%
80%
60%
40%
20%
0%
55%
A Consumer
Plaintiff
Firm Plaintiff That
Appears Once
Frequently
Appearing Firm
Plaintiff
The use of arbitration clauses is an important shrouded benefit reduction. Many borrowers are unaware of
the arbitration clause hidden in almost all credit card terms and conditions, or its potential impact on their
ability to settle disputes. Looking at a database of arbitration disputes compiled by Public Citizen and
consisting primarily of credit card cases, we found evidence of bias against consumers. All types of firm
plaintiffs got better results than consumer plaintiffs, but firms that appeared frequently got the best results
(see Figure 8). In addition, arbitrators had a clear incentive to be biased, with arbitrators that sided with
firms more receiving a larger number of cases in later periods (see Figure 9). The bias in arbitration
combined with lack of access to the court system can result in a shrouded benefit reduction in a number of
ways. For example, credit card issuers often tout the limited fraud liability consumers have when they use a
credit card. However, that right depends on a credit card issuer not ignoring claims of fraud. And in some
cases when issuers persisted in pursuing a debt despite claims that is was incurred through fraud,
arbitrators have sided with the issuers and ignored the fraud claims. 22
22 John O’Donnell, “The Arbitration Trap: How Credit Card Companies Ensnare Consumers,” Public Citizen, 2007,
available at http://www.citizen.org/documents/ArbitrationTrap.pdf.
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