Have you signed a financial contract within the past couple of years? That would be any agreement between you and a car dealer, a bank, a doctor or hospital, a commercial gym or any other kind of business.
If you have - and if you haven't examined the contract to read the fine print - you may have signed away some of your rights. These would be the rights that protect you as a consumer under Federal laws such as the Fair Debt Collection Practices Act or the Fair Credit Reporting Act.
Consumer advocates say getting customers to sign away their legal rights is a trick that many businesses are now adopting, with a legal maneuver called 'mandatory arbitration.' If you sign, you agree to the mandatory arbitration clause in the fine print of a contract. That means you sign away your rights to have your day in court. Basically, the experts say you’re agreeing that any issue or claim you might have of unfairness, will be given to a professional 'arbitrator' to decide. That's where problems can begin.
Paul Bland is an attorney in Washington, D. C. who has argued against mandatory arbitration clauses in more than 15 state courts and dozens of Federal courts throughout the country. He says arbitration rarely, if ever, helps the public. "The arbitration system is essentially a corporate tribunal set up by companies, and it's a very rigged system. Rigged against the consumer,” Bland says. “Unlike a court, where judges have to write opinions that set out their reasoning, most arbitration is secretive. Arbitrators don't have to give any reasons (for their decisions)," he says.
Bland sides with legal experts who say that if you want to get to the truth about arbitration, just follow the money. Lester Perry, a Utah consumer lawyer in Holiday, agrees. He says that banks, credit card companies and debt collectors have huge numbers of arbitration cases that involve large fees.
"That arbitrator and arbitration company knows that if they rule against the bank or credit card company once or twice, that big pipeline of arbitration cases will be cut off. They won't see another one. So the arbitrator has all the incentive in the world to always rule of behalf of the bank," Perry explains.
But the worst part, according to Perry, is that the arbitrator's decision can't be questioned. "It's final, it can never be appealed. Hundreds of thousands of arbitrations were being decided in favor of the credit card companies and collection companies 99.9 percent of the time, as if only one person in a thousand has any defense against a credit card debt," he says.
Perry adds that the issue got so bad, there was even a Congressional investigation. He says, "Congress knows that mandatory arbitration isn't a good thing, because several years ago, they got rid of it in any agreements that a soldier or sailor signs. They wanted to protect our servicemen, because they know it's very bad for them. They also know it's bad for the everyday person; but it's not the everyday person that's funding the re-election campaign."
But there are signs that things may be changing - and that's another reason why both attorneys warn people to read all the fine print thoroughly before signing a contract.
Bland says, "A small number of companies are putting provisions in the arbitration clauses that let consumers opt out of arbitration if they want to. The companies know that almost no consumers ever read the fine print, so then they can use the existence of the 'opt out' to defend themselves against reporters or members of Congress who question them. If the consumer is paying attention, there are some of these clauses where you can say no to mandatory arbitration. But one of the things a lot of companies rely on is that consumers don't complain about it or don't look at it. Most consumers aren't even aware of the problem."
The odds are still mostly stacked against consumers. That's why both Perry and Bland, as well as many other consumer advocates, say that mandatory arbitration is the biggest problem in consumer law today.