Congress Eyes Mandatory Arbitration Clauses in Contracts
If you have a credit card, buy a car, or sign up for a cellphone plan, and chances are, if you're unhappy with your transaction, you won't be telling your story to a judge.
Many consumer contracts include mandatory arbitration clauses that force individuals to go through arbitration, instead of civil court, if a dispute arises. Some of these clauses also ban customers from joining class-action lawsuits.
For years, consumer advocates have claimed these clauses are unfair.
Now Congress is considering a blanket negation of predispute mandatory arbitration agreements. The Arbitration Fairness Act of 2007, recently introduced in the Senate and House of Representatives, proposes making the clauses unenforceable. The Arbitration Fairness Act, introduced in the Senate and the House on July 12, would amend the Federal Arbitration Act passed in the 1920s. which was intended to settle disputes between companies of similar size and power. But a series of Supreme Court decisions broadened the law to consumer cases.
''This is, by far, the most comprehensive bill that has been introduced. There have been bills that ban arbitration in the employment section or the banking section,'' said Paul Bland, a staff attorney with Public Justice, a national nonprofit public-interest law firm in Washington, D.C.
I think this legislation is absolutely needed and highlights consumers' vulnerability when it comes to arbitration. While concept of arbitration is good, the arbitration system is not set-up to be fair to consumers. First, many times consumers overlook arbitration clauses, but by purchasing goods or services governed by such clauses, they agree to settle any disputes through arbitration, giving up their right to a jury trial. Decisions by arbitrators -- lawyers or professionals who oversee and rule on cases -- are final and cannot be appealed.
And, mandatory arbitration clauses tend to give companies, not the public, protection because the arbitration process can be costly and the time to make a case is limited. I know from experience, companies tend to win arbitrations, not the consumer, because companies are repeat arbitration customers.
''If arbitrators rule against companies too often, they get blackballed,'' Public Justice's Bland said.Check out this story if you want more proof http://news.yahoo.com/s/fool/20071005/bs_fool_fool/119160199420.
Until legislation is enacted to get rid of these mandatory arbitration clauses, I cannot stress enough that you take the time to read the fine print of the contracts you sign. And if you see a mandatory arbitration clause, I know it may be hard, do not agree to it. Cross it out, date and initial or refuse to initial under the clause. More often than not, a merchant will still sell the product to you without you having to give away your right to a jury trial. I have yet to hear of a car dealer losing a sale because a consumer said no to a mandatory arbitration clause...credit card and cell phone companies may be a different story and you just may have to go to their competitor who doesn't require mandatory arbitration for its goods and services.
