The Fine Print
Hidden in the fine print of many consumer contracts - from credit cards and cell phone contracts to nursing home care and employment contracts - are dangerous forced arbitration clauses. Consumers and employees are often forced to sign these clauses in order to receive services or get hired and often don't know they've signed-away their legal rights until it is too late.
In the event of a dispute with the corporation, forced arbitration says that a consumer or an employee cannot take their case to court but instead has to go to a private arbitration forum designed by the very corporation the dispute is against.
The New York Times recently published an investigative series of front page stories exposing the corporate bullying tactic of forced arbitration. The stories are based on thousands of court records, interviews with lawyers, judges, arbitrators and the people who have been affected by forced arbitration, in 35 states.
The first story “Arbitration Everywhere, Stacking the Decks of Justice" describes the pernicious practice of forced arbitration, a get-out-of-jail free card for corporate wrongdoing.
The second story, "In Arbitration, a Privatization of the Justice System" tells stories of consumers who lost their right to go to court when a school, a car dealership, and even a nursing home had done them wrong.
The third and final story “In Religious Arbitration, Scripture is the Rule of Law” focuses on how religious tribunals, once used to settle family disputes and spiritual debates, are now being used to sort out secular problems like claims of financial fraud and wrongful death.
How Americans Are Hurt By The Fine Print:
- One-sided Requirements - Most forced arbitration clauses require the consumer to waive their rights, while allowing the corporation to sue in court.
- High Costs - Consumers often must pay steep filing fees just to initiate a case and pay their share of the arbitrator’s hourly charges. In addition, forced arbitration clauses often allow the corporation to choose the location, regardless of how inconvenient or costly travel will be for the consumer.
- Biased Decision-Makers - Since only businesses are repeat users of an arbitrator, there is a disincentive for an arbitrator to rule in favor of a consumer if he expects further retentions.
- Weak Civil Justice Safeguards - Forced arbitration clauses often severely restrict the individual’s ability to argue his or her side of the case. For example, many restrict the individual’s ability to obtain necessary evidence. Also, it is nearly impossible to appeal adverse decisions by arbitrators.
- Secret Backroom Proceedings - While proceedings and records of the courts are open to the public, most forced arbitration clauses require that proceedings be kept confidential, even if the case raises important public health and safety issues.
Policy Changes needed:
- The Centers for Medicare and Medicaid Services (CMS) should prevent nursing homes from taking away the legal rights of their residents through the use of forced binding arbitration. The agency is currently in the process of udating rules for nursing homes, and consumer and health advocates have called on the agency to prohibit nursing homes from using pre-dispute arbitration clauses when it issues a final rule.
- In October 2015, the Consumer Financial Protection Bureau (CFPB) announced the outlines of a plan to reinstate the power of consumers to band together with other consumers to go to court when thousands are cheated in the same way by the same widespread scam. The agency should strengthen its plan and move forward.