By the Securities Arbitration Commentator (“SAC”)


(This work was originally published in the July 10, 2014 online edition of the Securities Arbitration Alert, and is republished here with some stylistic changes as a guest blog post with the permission of and our thanks to SAC’s founder and president Richard Ryder, whose firm also has a blog, and can be followed on Twitter @SACDispres).


The American Arbitration Association (“AAA”) announced on July 10th that its Consumer Arbitration Rules are being amended effective September 1st to require firms to register consumer predispute arbitration agreements (“PDAAs”). The data will be maintained in a publicly-accessible Consumer Clause Registry (“Registry”). Specifically, Consumer Arbitration Rules rule R-12 now provides that, as of September 1st, “a business that provides for or intends to provide for these Rules or another set of AAA Rules in a consumer contract (as defined in R-1) should 1) notify the AAA of the existence of such a consumer contract or of its intention to do so at least 30 days before the planned effective date of the contract [and] 2) provide the AAA a copy of the arbitration agreement.”


The AAA announcement states that the Registry “was created to provide more access to information about the AAA’s consumer arbitration services. In particular, the Registry will contain a list of businesses that have submitted their consumer arbitration clauses with the AAA and where upon review the AAA has determined that the clause substantially and materially complies with the due process standards of the Consumer Due Process Protocol.” If a business hasn’t complied with the registration requirement when a consumer arbitration is started, the Association “will conduct an expedited review at that time.”


Registration is not free. There is a non-refundable initial “consumer clause review and annual consumer registry fee” of $650 for the rest of 2014. In 2015 this drops to $500, as do annual renewals. Expedited reviews cost $250. The Registry will be populated this summer and become available September 1st.


SAC’s Editorial Comments: *We like this approach. For some time now, we have believed creating a similar registry for PDAAs in brokerage agreements would be a good move (word to the newly-formed FINRA Arbitration Task Force…). **It would seem the registration requirement would apply to customer-broker agreements calling for AAA rules, since rule R-1 provides “the AAA defines a consumer agreement as an agreement between an individual consumer and a business where the business has a standardized, systematic application of arbitration clauses with customers and where the terms and conditions of the purchase of standardized, consumable goods or services are non-negotiable or primarily non-negotiable in most or all of its terms, conditions, features, or choices. The product or service must be for personal or household use.” The rules give examples of contracts that are included in the definition and those that are not; customer-broker agreements are not on either list.



***Many agreements between investment advisers and retail customers call for AAA arbitration.) (SAC Ref. No. 2014-26-06)

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