Arbitration: New Battles Are Coming
The New York Times recently ran a three-part series. The series shows how various corporations – phone companies, credit card providers, nursing homes – use arbitration clauses to avoid judges and juries, who are the back bone of American’s constitutional justice system.
What does the expansion of arbitration mean for consumers? If you have a legal dispute with your phone company over a fees you did not agree to pay, the phone company is going to try and send your claim to arbitration, rather than having your legal dispute presented in court to a judge and jury.
Why do corporations want your claim sent to arbitration? A recent three-year study by the Consumer Financial Protection Bureau made the following findings:
- Tens of millions of consumers use financial products subject to forced arbitration.
- Few consumers seek to arbitrate individual disputes because the costs outweigh individual rewards.
- In just one four-year period, consumers won more than $2 billion in relief when they were able to protect their rights in class actions.
- When individuals took disputes to arbitration they won only 9.3 percent of the time.
- When businesses took a dispute to arbitration they won ten times more often.
- In 2010 and 2011, businesses won arbitration claims against consumers totaling $2.8 million.
- In the same time period, arbitration awards in favor of consumers totaled less than $400,000.
What is being done to scale back arbitration?
- The CFPB is proposing a new rule, which would prevent financial services companies from including class-action bans in consumer contracts.
- The Justice Department issued a proposal to protect military service members from arbitration requirements.
- Senator Al Franken, a long-time opponent of arbitration, renewed his push to pass a bill that would prevent companies from requiring employees to go to arbitration.
- President Obama may use his executive authority to prevent federal contractors from including arbitration clauses in their contracts with customers and employees.
- San Francisco’s city attorney, Dennis Herrera, sued American Express this month over its arbitration clauses. The lawsuit will hopefully help small businesses whose contracts with the credit card company prevented them from filing a class-action lawsuit.
- In Chicago, Alderman Edward M. Burke said he planned to introduce a bill this week that would prevent the city from doing business with companies that push employees and customers out of court.