Latest data: Consumer claims sent to private courts take 9 months to resolve; most settled in secret

Analysis released this week shows a 25% quarter-on-quarter increase in consumer claims resolved through the private court system known as arbitration. Still, fewer than 1,500 claims were processed in the quarter. That stands in contrast to the hundreds of millions of American consumer contracts formally covered by the arbitration system.

Chart by FairShake

What is arbitration?

Arbitration is a dispute resolution process typically required by a clause hidden deep within the service agreements of companies in industries like financial services, tech, and telecom. There have long been questions of whether forcing wronged consumers to pursue justice individually through arbitration carries outsize benefits for the biggest companies.

How can FairShake help?

The new analysis was produced by consumer rights service FairShake, which works to make arbitration more accessible for individual consumers.

The company based its analysis on third quarter data released by the American Arbitration Association (AAA) and JAMS (formerly known as Judicial Arbitration and Mediation Services, Inc.). The two organizations are the largest administrators of consumer arbitration in the US, and are legally required to release data each quarter.

FairShake’s analysis showed that the top 3 defendants in consumer arbitration remained consistent quarter to quarter. They switched places in the rankings, however, with American Express dropping from the most frequent target of arbitration to the second most, while AT&T increased from third place to take the top spot with 241 claims. Car loan offerer Santander Consumer USA saw the third most claims in Q3.

Chart by FairShake

While telecom and financials services dominated the list of frequent arbitration targets, other companies appearing on the list included Tinder, Airbnb, and the Kaiser health system.

How much can I win?

Consistent with prior quarters, well over half of consumer arbitration claims were ultimately resolved through a private settlement between parties on confidential terms. Of those not settled, only nine percent were decided in the consumer’s favor, with a median award of nearly $6,000.

Chart by FairShake

How long does it take?

Arbitration claims took an average of nine months to resolve. However, for claims that resulted in a final ruling (an award or dismissal), the average process took 11 months for the AAA and nearly 15 months for JAMS.

Consumer arbitration has been a controversial legal topic in recent years. Businesses claim it provides an efficient process to resolve disputes without incentivizing class action lawyers to run up large legal fees.

But lawmakers and researchers often claim it causes more problems than it solves. An act to reverse forced arbitration provisions recently passed the House of Representatives, while California recently passed a bill to speed up arbitration proceedings which was prompted by Uber’s refusal to pay mandatory fees in arbitration cases brought by drivers.

See FairShake’s First Quarter and Second Quarter releases for more analysis of arbitration data.