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Why Consumers Should Care About Forced Arbitration

 

Last week, attorney Dan Blinn and I attended the National Consumer Law Center's Consumer Rights and Litigation Conference in Washington, D.C.  The day before the conference began, we and other members of the National Association of Consumer Advocates ("NACA") visited the offices of our state's Representatives and Senators to discuss the Arbitration Fairness Act ("AFA").

 

Arbitration is becoming a bigger and bigger issue for consumers.  Here's why:

 

1.  Giving up Legal Rights- When a consumer signs a contract with an arbitration clause, he or she is signing away the right to take a business to court. Unlike court, arbitration is a private meeting where an arbitrator (who may not be a legal professional), decides the outcome of a case.

 

2.  Bias- Unlike a judge, an arbitrator is paid by one or more of the people who are having the dispute.  In most cases involving consumers, this means that arbitrator is paid by the company that they are disagreeing with.  Because many companies create repeat business for arbitrators, there is a risk that arbitrators may favor businesses.

 

3.  Secrecy- Arbitration is private, not public like a court.  Court cases can get the word out that a particular business is using unfair practices.  In a private arbitration, people that are not directly involved will never find out what happened.  This allows some businesses to continue to use the same unfair practices against consumers in the future, all without damaging their reputations.

 

4.  Burden- An arbitration clause might say that arbitration has to take place in a specific place.  This place could be all the way on the other side of the country. If the consumer cannot afford a plane ticket to get to the arbitration, he or she will probably be unable to bring a claim.  Another example is arbitration clauses that require consumers to pay a certain amount of money toward the arbitrator’s fee.  Even if the amount is more than the consumer can afford, the consumer cannot sue in court.

 

5. Finality- There is practically no right to appeal in arbitration.  In a court case, if one of the parties feels that the judge decided incorrectly, he or she can file an appeal to have another court look at the decision.  In arbitration, the say of arbitrator is usually final.

 

6. Lack of Choice- Perhaps the biggest issue with arbitration is the fact that most consumers are not even aware that they have agreed to arbitration, and, even if they are, there is nothing they can do about it.

 

If you've ever signed up for a cell phone, chances are that you've “agreed” to arbitration with your cell phone company—most, if not all, cell phone companies have arbitration agreements in their contracts.  Check the small print on your contract (it might be on the back).  If you’re like most consumers, you probably didn’t even know the arbitration clause was in there, or, at least, you didn’t know what it meant.

Now, imagine that you were aware of the arbitration clause when you signed up for your cell phone plan.  Imagine the conversation you’d have with the employee at the cell phone store when you tell them that you don’t want to agree to arbitration.  They’d probably tell you that they can’t change the contract and you have to accept it if you wanted the phone.  And since every cell phone carrier that we know about uses arbitration contracts, it’s not as if you could go buy from another company.

 

If the AFA becomes law, businesses and consumers will still be able to use arbitration if they both want to.  However, the AFA will prevent surprise, or one-sided, arbitration agreements.  We urge consumers to contact their U.S. Senators and Representatives and ask them to support the AFA. Both Senator Blumenthal, Senator Murphy, and Representative Courtney have already supported the AFA, so if you contact them, you should thank them for their support.

 

For help finding your elected officials, you can go to http://www.usa.gov/Contact/Elected.shtml.  For more information on forced arbitration, please visit http://naca.net/issues/forced-arbitration

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