More and more consumer-oriented contracts have clauses specifying that disputes must go to arbitration rather than to court. The justification for this is that arbitration saves the time and expense of working within our legal system. But here is the rub: the company chooses the arbitrators. And since they provide the business, every arbitrator knows they will never get another job if they rule against the company.
According to a Business Week article on June 5, 2008, “Corporations seldom lose. In California, the one state where arbitration results are made public, creditors win 99.8% of the time in NAF (National Arbitration Forum) cases that are decided by arbitrators on the merits, according to a lawsuit filed by the San Francisco city attorney against NAF.”
So what are these clauses? They are often buried in the fine print. The consumer waives the right to sue or to participate in a class action lawsuit. Often the consumer does not even realize that they have done so. Want a job, want health insurance, want a loan, a credit card, or a rental car? You often have no choice but to give up your right to a day in court because of such clauses.
The arbitration system is a lawless system. The judges, called arbitrators, do not have to follow the law or even justify their decisions. Typically, their decisions cannot be appealed. The arbitration often costs more than using the court. The clauses are written by companies and favor the business, rather than you.
So what can you do? Read the fine print. Try to do business with those companies that do not use arbitration clauses. Sometimes you can send a letter to the company to “opt out” of the clause. Legislation is pending before the U.S. Congress called the Arbitration Fairness Act – let your senator and representative know you are interested.
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