You know the drill. You click “agree,” sign your name a couple of times and walk away with a new cell phone, cable tv service or a new credit card. Congratulations, you may have a new whatever but you’ve also likely signed away your rights to go to court if there’s ever a problem.
Lurking in many consumer agreements are sneaky provisions requiring you to give up your right to sue if something goes horribly wrong. How? Through the use of ‘arbitration provisions.’
These provisions mean consumers first sign away their right to file a claim and if they want to go to arbitration they could end up paying for the privilege. Arbitration is a non-judicial process used to settle disputes between two sides without going to court. Decisions are usually made by a single arbiter, but in some cases it can be more than one.
Add to that the hearing is usually handled by a firm selected by your opponent. Unlike a court hearing, arbitration is one round – if you lose, it’s over and the odds are you will lose. According to the Consumer Financial Protection Bureau (CFPB), business wins 93% of that cases going to arbitration.
Now, here’s the real catch. Arbitration can also be very expensive. Depending upon the contract you’ve signed, you can still lose even if you win at arbitration because of processing fees and the fact the hearing could even be held in another state. For consumers, arbitration is a process that has little to do with fairness.
Worse yet, consumers with small claims – perhaps just a few hundred dollars or so – are frequently required as a condition of these arbitration agreements to pay more than the value of their claim to pursue justice. Think small claims court is an option? Wrong. You can’t go there either because you agreed to give up your rights to sue. Class action suit? Nope. Those are outlawed as well.
But in the darkness there is hope. The CFPB recently released a 728-page report that will shock no one but could be an economic lifeline for some 30-million consumers caught up in these so-called agreements. The report found some 75% of customers who “agreed” to arbitration clauses were not even aware they had signed away their most basic of legal rights. It also debunks claims that forced arbitration clauses lead to lower consumer prices, a key argument of many businesses that employ the strategy. With luck, the report could be the impetus for more consumer friendly guidelines.
So what can you do as a consumer? Look for these provisions and ask about them. See if your bank will allow you to opt out (some do). If they won’t, consider looking elsewhere for that credit card or internet connection.
There’s also a hero in this – Minnesota Senator Al Franken – who along with Congressman Hank Johnson (D-GA) have introduced the Arbitration Fairness Act, which would prohibit forced arbitration in employment, consumer, civil rights and anti-trust cases. Importantly, voluntarily arbitration would remain available.
For far too long, big business has held the upper hand at the expense of consumers, but there are signs of change in the air. But is imperative for all of us to keep pushing back no matter how long the odds. If you don’t like the terms of a contract, don’t sign it. Walk away, and if enough consumers follow suit, sooner or later, business will take notice.
Restoring and reinforcing our right to a jury trial – our 7th Amendment right – should be our goal. Let’s open the doors the courthouse for all of us to have the right to bring claims before our judges. Not be limited to paid umpires that rule for the other team 93% of the time.
Because we’ve all had a taste of the alternative and it’s not good.