Public Citizen | Action Items

How to Escape the Arbitration Trap

The Arbitration Trap We all sign confusing contracts written in tiny print whenever we get a new credit card, cable service, insurance or even when we take a new job. Unfortunately, companies have started to slip Binding Mandatory Arbitration (BMA) clauses into the legalese. It may sound benign, but it’s not.

Binding mandatory arbitration essentially privatizes the judicial process. By signing your name on the dotted line, you forfeit your right to a trial by jury. Just consider: If someone steals your identity to buy a $4,000 plasma TV and the credit card company want you to pay for it, the dispute completely bypasses the courtroom and goes straight to a for-profit arbitrator.

These arbitrators make their exorbitant salaries from repeat business by the credit card companies - so it is no surprise they find in their favor nearly all of the time.

But, there is something you can do about this! Personalize the letter below to insist that your members of Congress support legislation to ban the use of pre-dispute binding mandatory arbitration clauses in consumer and employment contracts.

February 09, 2010

Subject:

I am writing to urge you to support the Arbitration Fairness Act of 2009. Introduced by Sen. Russell Feingold (D-Wis.) in the Senate and Rep. Hank Johnson (D-Ga.) in the House, this bill would help consumers by eliminating pre-dispute binding mandatory arbitration (BMA) clauses in consumer and employment contracts. Binding mandatory arbitration clauses in credit card, employment, and insurance contracts force individuals to forfeit their right to a trial by judge or jury if dangerous products, services or workplaces harm them. BMA does not help ordinary people, but benefits big corporate interests like national banks and insurance companies. They use it as a means to evade accountability for any harm they cause or laws they break - laws meant to protect consumers and employees. There are several reasons why the Arbitration Fairness Act of 2009 needs to be passed. First, most individuals have no choice but to accept the arbitration clause. If they want the product, service or job, or even if they are required by law to buy the service, as is the case with auto insurance, consumers are forced into BMA. Second, the lack of any meaningful independent review of arbitration decisions creates a climate ripe for abuse. The arbitration process is secretive and the courts have little involvement. Companies impose arbitration on consumers to keep their corporate misbehavior hidden from the piercing sunlight of our public civil justice court system. Third, arbitration companies are beholden to companies that hire them for repeat business, which creates a bias. For example, public data published in Public Citizen’s report "The Arbitration Trap: How Credit Card Companies Ensnare Consumers" show that in the portfolio of one California arbitrator who ruled in 532 cases, 526 were in favor of business - a mere 1.14 percent for the ordinary consumer. The Arbitration Fairness Act of 2009 would change this terrible anti-consumer landscape. If we are to have any hope of restraining powerful corporate interests from abusing their overwhelming market power to the detriment of individuals, families, workers and whole communities, it must change. It's time to enact the Arbitration Fairness Act of 2009 and roll back the damage being done to our rights and liberties for the sake of profit. Thank you for listening to a constituent. I look forward to your reply.
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