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It’s hard to do anything these days without signing some kind of contract. Want to start service with a cell phone provider? You’ll need to sign a contract. Ordering some kitchen appliances online? You have to scroll to the bottom of the company’s Terms of Service and check that box that says “I agree” first. Starting a new job? Plenty of paperwork and contracts to sign there too. We’ve become used to contracts; to seeing legal jargon everywhere we go and to needing to agree to it to do pretty much anything we want or need to do.
It’s not necessarily a bad thing. Contracts were initially used to protect both parties and provide guidelines to follow in the event that one or both parties were, for some reason, unpleased with the agreed upon transaction. They were meant to help make navigating any legal proceedings easier and less troublesome for everyone involved. In recent years though, corporations and employers have been slipping in arbitration clauses that not only make legal recourse impossible for the consumer, they protect the actions of the company regardless of whether they acted ethically or not.
Simply put, arbitration is a means of solving disputes outside of the courtroom. If two parties have a disagreement, arbitration is used to find an unbiased solution to the problem. An arbitrator is like a middle man. They’re the one who listens to both sides’ stories and decides what the outcome of the dispute will be.
The above definition is rather broad, as there are several different forms of arbitration:
For the purposes of this article, we’ll focus on forced arbitration and how it affects the individual. You see, consumers should have the right to sue a company or file a class action lawsuit if they believe they have been taken advantage of or treated unfairly. The reason companies like these clauses, is that it completely blocks the individual consumer from taking any legal action. While this should be totally illegal, according to the Supreme Court, it’s not.
The tricky thing is knowing when and where to look for these clauses. In many cases, you simply cannot get around having to agree to one if you want the service or product you’re trying to get. These agreements can be found in contracts for various industries, including but definitely not limited to:
Corporations and businesses try to justify using these clauses by claiming that they save everyone far more time and money than a traditional lawsuit would and that, by extension, this lowers the cost of the product to the consumer. A research study performed by the Consumer Financial Protection Bureau says otherwise, however. According to the study, the CFPB “found no evidence that arbitration clauses lead to lower prices for consumers.”
Not only does it not lower costs for the consumers, it’s not more convenient for them than a lawsuit would be either. Arbitration cases can take years to settle and are often held in a location that makes it difficult for the claimant to be present for the hearings. The biggest downside of arbitration is that it blocks consumers from forming the class action lawsuits that could not only be won, but could prevent the company in question from treating more consumers unfairly in the future. Without the right to band together to file a class action suit, consumers must fight corporations one-on-one, one by one; a very ineffective means of provoking substantial change.
The cost of the arbitration itself is split, requiring the disgruntled or injured individual to shell out hundreds or even thousands of dollars if they want to keep the case moving along. Public Citizen, a consumer watchdog group, performed a study to compared the costs of arbitration to that of a court case.
In one of the examples given, a claim that is worth $80,000 would cost over $9,000 to arbitrate. That same claim would cost roughly $250 to file in a state court. Add to the cost the arbitration fees, which could easily surpass $10,000, administrative costs, and the fees you owe your attorney, and it becomes clear why arbitration is anything but good for the consumer.
When something as damaging as arbitration is so widespread, it can be very difficult for consumers to protect themselves or fight back. That said, there are precautions you can you take to try to limit your exposure to arbitration, or at least understand your options a little bit better.
The following are tips given by ABC News in regards to mandatory arbitration protection:
You may be a little flabbergasted after reading this, and rightly so. How can you help? Call your local congressman, or write him or her a letter calling for reform and requesting the passing of a law that would limit forced arbitration. Want arbitration to come to an end? It will be a long and hard fought battle, but there is power in numbers and if enough people act together, it may just work.
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