Congress will soon take up the question of mandatory arbitration clause reform. Mandatory arbitration clauses appear in various legal documents consumers come into contact with everyday. Car salesmen include them in their contracts routinely. Credit card companies also use them in all consumer contracts.
The clause takes away the consumers right to sue the business if they are wronged by the business. By agreeing to mandatory arbitration, the consumer agrees to address any grievance with the company they are doing business with through an arbitration company. Why would a business, like a car dealership or credit card company want to arbitrate all claims against it? Because the arbitration company they use will rule in their favor the majority of the time. According to an article on the subject titled “Suckers Wanted”, arbitrators rule in favor of the businesses that hire them 94% of the time. Pretty good odds.
One of the reasons business wins over consumers in arbitration is that the businesses name the arbitrator. So if an arbitrator rules in favor of consumers, he isn’t hired by the business again. The article cites a study of HMO arbitration cases. The study found that if an arbitrator ruled in favor of the patient, the HMO never hired that arbitrator again.
Congress is gearing up to amend the Federal Arbitration Act, to outlaw the type of mandatory arbitration clauses that consumers are bound by in credit card contracts and car sales contracts, as well as to stop mandatory arbitration clauses in employment contracts.
The Chamber of Commerce is cranking up an ad campaign to convince the public that arbitration clauses are good and that trial lawyers are behind the anti-arbitration movement. Larry Akey from the Chamber had the following quote in the article:
“Efforts to force people to hire attorneys for even the smallest dispute are wrong…(consumers don’t need a lawyer in arbitration). The real motive on the part of the trial bar is to wipe out prohibitions on class actions, not to protect consumers.”
No the real motive is to allow consumers to protect themselves when they transact business with an unscrupulous company.