Fighting Back Against Forced Arbitration

Tucked in the fine print of health insurance, cell phone, car rental, credit card, nursing home, employment, construction, and even home repair contracts, to name a few, are forced arbitration clauses. If you don't know what forced arbitration is, it's essentially a clause that strips away your right to sue if they violate your agreement with them.  This doesn't mean that contract violations can't end up in court, of course, as the company reserves its right to sue you -if you're the one who violates the contract.  Some creditors, lenders and other companies have been known to do quite a few underhanded things to keep an advantage over consumers; one of the worst of these tricks is forced arbitration.

Instead of getting your day in court, starting a dispute with a company gets your grievances placed in arbitration.  This means that a third-party company will weigh both sides of the issue and help you to reach an agreement that's fair to all.  At first this doesn't sound so bad, and almost sounds like what would happen if you went to court over the matter anyway.  Here's the part where it all falls apart, though.  The arbitration company is hired by the employer or company that you have a problem with, and is much more likely to be hired for arbitration in the future if things go in the company's favor.  If things go in your favor, they run the risk of being blacklisted --and less likely to be hired again.  So how do you think an alarming number of arbitration cases go for the consumer?

When you think about the fact that arbitration companies have ample reason to be biased in favor of the company that hires them and that your case will only go to arbitration if you're the one who's filing (and paying for) the dispute, it's easy to see how this system doesn't work. It does little to nothing to deter corporate wrongs or hold wrongdoers accountable. Forced arbitration is favored by companies because it benefits them--no surprise there. 

Arbitrators aren't required to take the law or any legal precedent into account when making their decision. You can't appeal it -nor can you make it public. It's quite quickly buried under the rug -kept in the dark--far away from public scrutiny. Forced arbitration frequently costs more than taking a case to court and individuals often can't afford the hefty upfront fees required to initiate the arbitration process. As a consumer, if you are harmed by a defective product-a "you can't sue me" clause bars you from suing and effectively says: tough luck! And if you are an employee who has a dispute with you employer --and learn you are bound by an arbitration clause --you can't sue for discrimination, harassment, abuse, retaliation or wrongful termination.
 
Consumer advocacy groups are working to even the playing field. They have been leading the fight against forced arbitration in an effort to help lawmakers take notice of how unfair, costly and crooked one-way arbitration clauses are. The National Arbitration Forum, one of the largest arbitration firms was sued by the Minnesota attorney general in 2009 and left the consumer arbitration business to avoid further legal problems as a result of its decidedly biased business practices.  This will hopefully be the beginning of a trend, with the states taking action against those who claim to provide an unbiased service but are instead more often than not just another part of the debt collection industry.

Another example can be found in American General Financial Services, Inc. which found itself in hot water with the New Mexico Supreme Court.  According to Public Justice, a national public interest law firm who handles precedent-setting individual and class action cases, the company was sued for violating Kim Rivera's consumer rights and causing intentional harm to her credit over a debt she was no longer responsible for, an action that eventually led to the loss of her job.

"After her truck was destroyed in an accident, Rivera was no longer liable for the debt, but American General kept trying to collect:  it notified credit reporting bureaus that Rivera was delinquent and hired a law firm to recover the debt. As a result, Ms. Rivera's credit was shot, and without reliable transportation -- or the ability to get another loan for a new vehicle -- she ended up losing her job."

When the company tried to substitute an arbitration firm because National Arbitration Forum would no longer take the case, the Court pointed out that they were bound to use NAF or not to use arbitration at all.  (PDF Ruling)

Despite these attempts at legal maneuvering, thanks to Public Justice, the company will now have to face Rivera's charges and be held accountable for its actions in a court of law.

Our justice system works on the notion that if you do wrong, you will have those wrongs exposed in a court of law and you will pay the price. We know that nobody really likes rules and regulations, but we live in a system of laws, laws designed to protect the innocent and punish wrongdoers. Without access to justice - how will we deter, expose or right wrongs?

If you feel forced arbitration is a wrong we need to right --visit fairarbitrationnow.org -where you can sound off,  write your representative, and sign the petition to ban forced arbitration. It's important to  keep up-to-date on any legislative or legal news. If you have your own story about arbitration -share it!  Pain a human picture -it can tell a thousand words.