1. The process is mandatory, not optional – And it’s typically imposed in the fine print of a standard “contract of adhesion” that often goes unnoticed and allows no room for negotiation by the consumer.
2. Panels are biased – Typically comprised of people either involved in the industry or with a prior history of working on the industry side.
3. Discovery is limited – Which disadvantages consumers the most, since key evidence of wrongdoing is typically in the hands of the financial services company.
4. Damages are often restricted – Typically excluding punitive damages and even attorneys’ fees.
5. The process requires an attorney – As a practical matter, consumers need counsel since the firms are invariably represented by experienced counsel.
6. The process can be expensive – Especially if retaining an expert witness or fighting motions filed by the firm are necessary.
7. The process takes time – While the arbitration on average takes less time than a court case, it can nevertheless drag on for months, even years in some cases.
8. Panels are not required to follow the law – And they often just go by their gut sense, shaped by their past careers in the industry.
9. Panels are not required to issue written explanations – And they seldom do.
10. The decisions overwhelmingly favor the institution – Either because the panel rules in its favor, or the panel rules for the consumer but awards only a small fraction of the losses and attorneys’ fees.
11. The decisions and monetary awards are not public – So it’s difficult for other consumers to understand their prospects for success or how they should approach the process.  And it’s more difficult for regulators to discover patterns of wrongdoing at the firm.
12. Rights of appeal are extremely limited – Generally confined to extreme cases involving numerical mistakes or corruption among the panelists.

Is it any wonder that the financial services industry is fighting desperately to force consumers into mandatory arbitration?

The bottom line:  If the day ever comes when arbitration really is better for investors than litigation in court, as the industry keeps claiming, then investors will choose it.  Until that day, it shouldn’t be mandatory!