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A07175 Summary:

COSPNSRDinowitz, Cook, Steck, Colton, Gottfried, Hooper, Arroyo, Galef, Pichardo, Mayer, Seawright, Simotas, Abinanti, Miller MG, Williams, D'Urso, Sepulveda, Jaffee, Zebrowski
MLTSPNSRPerry, Simon
Amd 399-c, Gen Bus L
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.
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A07175 Memo:

submitted in accordance with Assembly Rule III, Sec 1(f)
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.
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