Relates to arbitration organizations; requires private arbitration organizations involved in fifty or more consumer arbitrations per year to collect, publish at least quarterly, and make available to the public in a computer-searchable database certain information relating to such arbitrations; prohibits financial conflicts of interest.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A7175
SPONSOR: Kavanagh (MS)
 
TITLE OF BILL: An act to amend the general business law, in relation
to arbitration organizations
 
PURPOSE:
The purpose of this bill is to ensure fairness and accountability in
arbitration proceedings conducted by private arbitration organizations
and further protect consumers from unfair mandatory arbitration clauses.
 
SUMMARY OF PROVISIONS:
This bill would require private arbitration organizations involved in
consumer arbitration cases, excepting those businesses whose only
relationship to arbitration is a contract clause authorizing arbi-
tration, to make certain information regarding those cases available to
the public on its website and on paper upon request. The information
required to be disclosed for each consumer arbitration would include:
the name of the non-consumer party; the type of dispute involved; wheth-
er the consumer was the prevailing party; and on how many occasions, if
any, the non-consumer party has previously been a party in arbitration
administered by the private arbitration organization. No private arbi-
tration organization would have any liability for collecting, publish-
ing, or distributing such information.
The bill would provide for enforcement by the Attorney General of the
arbitration information disclosure provisions, as well as the existing
prohibition against the inclusion of mandatory arbitration clauses in
certain consumer contracts. The Attorney General would be empowered to
seek an injunction against violators and/or a civil penalty of up to
$2,000 for each violation. Each contract offered and entered into in
violation of the mandatory arbitration clause prohibition would consti-
tute a separate violation. This bill also provides for a right of action
to any person who has been injured by reason of a violation of the
section provided in the bill.
 
JUSTIFICATION:
The proliferation of binding mandatory arbitration clauses in consumer
contracts, including contracts for credit cards; telephone service; home
loans; health care; and consumer goods, over the past twenty years has
led to a significant increase in the number of consumer disputes
referred to arbitration. The vast majority of these proceedings are
handled by arbitrators working for private organizations that administer
arbitration programs for private businesses. In recent years, consumer
advocates have raised concerns regarding the fairness of private arbi-
tration proceedings. Many advocates maintain that consumers may not be
able to get a fair hearing since an arbitrator has a financial incentive
to rule in favor of the businesses paying for his or her services.
According to a 2007 report issued by Public Citizen, between January 1,
2003 and March 31, 2007, arbitrators working for one of the largest
private arbitration organizations ruled in favor of businesses in nine-
ty-four percent of the cases involving California residents that it
examined. The report also found that:
-In one fiscal quarter, an arbitrator working for a large private arbi-
tration organization handled eighty cases brought by banks against
consumers, and ruled for the bank in all eighty cases. In all of the
cases, except two, she gave the bank one hundred percent of the amount
it claimed.
-Another arbitrator working for a large private arbitration organization
handled sixty-eight cases in a single day for an average of one every
seven minutes, assuming an eight-hour day-and ruled for the business in
every case, awarding one hundred percent of the claim. According to
Public Citizen, the same arbitrator is an attorney with his own practice
serving business and corporate clients.
-In several cases, arbitrators from a large private arbitration organ-
ization entered awards in favor of a large national bank and other lend-
ers against identity theft victims who did not, in fact, owe any debts.
-Arbitrators who rule against businesses and in favor of consumers have
been known to be blackballed from serving as arbitrators in future
cases.
This bill would shed light on the private arbitration industry and
provide for greater accountability for private arbitration organizations
by requiring such organizations to collect and make available to the
public basic data regarding the nature and outcome of consumer arbi-
trations. This would ensure that consumers who are given the choice of
pursuing a claim in the courts or in arbitration are able to obtain
access to relevant information, such as the number of cases a private
arbitration organization has handled for a particular business and
whether the business or the consumer won most of those cases. The bill
would also help to improve fairness in arbitrations for consumers forced
into arbitration pursuant to a contract containing a mandatory arbi-
tration clause.
 
FISCAL IMPACT ON THE STATE:
None.
 
FISCAL IMPACT ON LOCALITIES:
None.
 
IMPACT ON REGULATION OF BUSINESSES AND INDIVIDUALS:
Would impose new requirements, described above, on arbitration organiza-
tions.
 
IMPACT ON FINES, IMPRISONMENT, FORFEITURE OF RIGHTS, OR OTHER PENAL
SANCTIONS:
None.
 
PRIOR LEGISLATIVE HISTORY:
2016: A00108D (Dinowitz) - On the Floor
2015: A00108 (Dinowitz) - On the Floor
2014: A00604A (Dinowitz) - Passed Assembly
2013: A00604A (Dinowitz) - Passed Assembly
2012: A08431 (Dinowitz) - Passed Assembly
2011: A08431 (Dinowitz) - Consumer Affairs and Protection
2010: A7943B (Pheffer) - Passed Assembly
2009: A7943 (Pheffer) -Consumer Affairs and Protection
 
EFFECTIVE DATE:
This act shall take effect on the one hundredth and eightieth day after
it shall have become a law.