Originally from World Arbitration and Mediation Review

The Ernst & Young Study
Outcomes of Arbitration: An Empirical Study of Consumer Lending
Cases
by
Mary Batcher, Ph.D., Amy Brachio, and Mridula Shrestha
Executive Summary
As the frequency and volume of arbitration clauses in creditrelated
transactions have grown in recent years, so too has the discussion
over the implications of the pre-dispute arbitration agreements between
consumers and businesses. Businesses have faced criticism for including
these clauses in their contracts, particularly adhesion (or “form”)
contracts, supposedly hampering the individual’s right to due process.
Proponents of the process note its low cost, speed, and fairness to
consumers, as well as the reduced burden on an already overwhelmed
court system. With respect to consumer benefits, several studies using
empirical data from employment and securities arbitration have shown
that individuals may do as well or better in arbitration compared to
litigation.
Ernst & Young LLP (E&Y) was engaged by Wilmer Cutler
Pickering Hale and Dorr LLP to examine the outcomes of contractual
arbitration in lending-related, consumer-initiated cases. This study is
based on consumer arbitration data spanning four years from the National
Arbitration Forum, one of the country’s three leading alternative dispute
resolution organizations. Financial support was provided by the American
Bankers Association.
THE OBSERVATIONS FROM THIS STUDY ARE:
• Consumers prevailed more often than businesses in cases that went
to an arbitration hearing. A review of the consumer-lending cases
that faced an arbitration decision shows that consumers are more
likely to prevail than the businesses involved in the dispute; 55
percent of the arbitrations were resolved in the consumer’s favor.
• Consumers obtained favorable results in close to 80 percent of the
cases that were reviewed. If we expand the definition of
consumers who prevailed to include cases in which the parties
reached a settlement satisfactory to the consumer or the case was
dismissed at the claimant’s request, consumers prevailed in 79
percent of the total 226 cases.