It’s not that great a loophole, actually. The trick as a plaintiff is to start in civil court. Make the defendant move to compel arbitration and, if they’re successful, the court stays the civil action but retains jurisdiction. If the court orders arbitration and then the defendant refuses to participate, you have a judge you can go back to who has the power to do something about it.

Wait, just trying to understand this, why would a defendant that had earlier required an arbitration agreement in the contract refuse to participate in arbitration? Is it the case that without first starting in civil court, the defendant would be able to simply ignore the arbitration claims without consequences?

The processes to initiate arbitration can be ignored in some cases. You'd typically either file a 9 U.S. Code § 4 motion to compel or you would view failure to attend a a breach-of-contract and sue in civil court.

That said, a recalcitrant defendant can delay the start of meaningful proceedings a really long time. For example they can appeal the motion to compel and this would stay the civil court proceedings in the meantime (see Coinbase, Inc. v. Bielski).

The reason to do this is if the defendant is most likely in the wrong and just wants to delay paying as much as possible (or wear down the plaintiff). In true civil court the attorneys could have sanctions against them if they pointlessly delay the proceedings. Less so in arbitration.

Mandatory arbitration is deeply problematic but that isn't the problem.

Some better sources :

Katherine V.W. Stone & Alexander J.S. Colvin. (2015). The arbitration epidemic: Mandatory arbitration deprives workers and consumers of their rights (Briefing Paper 414). Economic Policy Institute. https://www.epi.org/publication/the-arbitration-epidemic/

Sternlight, J. R. (2005). Creeping Mandatory Arbitration: Is It Just? Scholarly Works, 57(280), 1631–1676.

- arbitration tends to award lower judgements than the courts

- it's harder to find a lawyer as a result (contingency is riskier)

- arbitors are not required to follow the law. There is almost no meaningful appeal even for substantive mistakes.

- arbitration is more informal and thus less procedural protection

- arbitration combined with class action waivers mean that each individually aggrieved person must sign up.

There are many other problems and sources but that's a decent start.