CONSUMER REDRESS IN THE UNITED STATES

Professor Amy J. Schmitz University of Colorado School of Law SSRN: http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=522704 Consumer Outreach: http://myconsumertips.info

The tip of the iceberg…

Roughly 1/3 of consumers take any action regarding purchase problems… but very few of those consumers assert requisite resources to get remedies

…while the vast majority do not assert or realize their rights.

Traditional Consumer Redress in the U.S.

Class Actions for Statutory Claims Make it Economical to Bring Small Claims Provide for Collection of Attorneys’ Fees Publicize Corporate Wrongs

Informal Customer Assistance Allows Merchants to Garner Goodwill Gives Consumers Speedy Remedies

Evolution of Consumer Redress in the U.S.

New Limits on Class Certifications Cutback and Outsourcing of Customer Service Proliferation of Pre-Dispute Arbitration Clauses

in B2C Contracts

What terms are important when it comes to a complaint?

88.6 82.4 80.1 78.4 62.7 53.3 50 43.1

020406080

100

YesNo

%

Arbitration Is Important for Consumers

Precludes Class Actions Hinders Access to Redress on Small Claims Stifles Information on Purchase Problems Lowers Costs Companies Arguably Pass on

through Lower Prices and Better Quality

U.S. Supreme Court Enforcement of Arbitration

American Express v. Italian Colors Restaurant Sanctioned Arbitration of Statutory Consumer Rights Despite Costs

Stolt-Nielsen S.A. v. Animalfeeds Int’l Corp. Limits Allowance for Class Arbitration

AT&T Mobility L.L.C v. Concepcion Limits Application of State Law to Deny Enforcement of Arbitration Clauses

Rent-A-Center v. Jackson Limits Judicial Power to Determine Arbitrability

Arbitration Law: U.S. vs. E.U. and U.K.

B2B: Universal Enforcement Per the NY Conv. B2C: Clashing Law and Public Policies

U.S. Strict Enforcement Per the NY Conv. & FAA E.U. & U.K. Refusal or Reluctance to Enforce Pre-

Dispute Arbitration Clauses in B2C Contracts

E.U. Stance on Consumer Arbitration

Annex 1[q] of the EU Directive 13/93: Makes pre-dispute arbitration clauses ‘prima facie’ invalid

EU ADR Directive: States that nationally certified ADR/ODR entities cannot use pre-

dispute arbitration clauses Allows Member States to deny certification of arbitration

schemes altogether (ie: Germany) ECJ Ruling in Mostaza Claro v. Centro Movil Milenium

Directs Court to Examine Arbitration Clauses in B2C Contracts Allows Examination Sua Sponte at Enforcement Stage

Where Do U.S. Consumers Turn With Low Dollar Claims?

Rare Arbitration Filings Near Elimination of Class Procedures High Filing Fees and Concern for Fairness

Small Claims Court Complicated and Inconvenient F2F Processes Lack of Awareness and Education

Where Do U.S. Consumers Turn With Low Dollar Claims?

Credit Card Chargebacks Narrow & Time Limited Lack of Online Processes

Complaint Portals Review & “Gripe Sites”: Unreliable & Unregulated CFPB: Promising But Difficult to Navigate

Limited Online Dispute Resolution (ODR) in the US

Generally Private (ie: eBay) Lack of Education or Awareness (ie: Facebook

Privacy Claims) Unregulated & Suspect for Bias (ie: Better

Business Bureau’s Partly Online ADR)

Suggestions for Following the E.U.’s Lead in the U.S.

Campaigns to Educate the Public on ODR Incentivizes for Greater Use of ODR in all States Development of Non-Binding ADR/ODR Options Adoption of Due Process Protocols

Merchants earn the right to post a trustmark by opting an ODR system that complies with due process standards

Example Process for Consumers

Buyer chooses

Seller responds

Buyer reports issue

Selects merchant, explains problem, requests resolution

Seller garners good will and avoids further cost

Seller offers and Buyer

takes refund or other remedy

Buyer and Seller settle or pursue next steps

Online mediation

Mass complaints trigger regulatory and consolidated actions, and health/safety issues are reported

Next steps: Online

arbitration

Key Considerations for ODR

Clear Contract and Website Notice Simplicity/Crafted for ALL Consumers

Accessible Guides & Demos Free/Low Consumer Costs

ODR Considerations…

Consumer Choice & Control Trustmark to Promote Security & Fairness

Trigger Mechanism for Regulatory Action Timely Decisions

Seeking Solutions

Aid Access to Remedies for All Individuals

Advance Enforcement of Consumer Protections

Augment Efficiency & Fairness for Companies & Consumers

Thank you! Your comments are welcome: amy.schmitz@colorado.edu

See the article and related data along with more recent

articles at: http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_i

d=522704

Visit my Consumer Outreach website: http://myconsumertips.info