top of page
Subscribe here for free:

Thanks for subscribing!

Forced Arbitration: A Terrible Deal for Consumers


President Biden recently signed H.R. 4445 into law, ending forced arbitration of certain sexual assaults and sexual harassment cases. Most lawyers know what most citizens don’t—forced arbitration is fairly commonplace and permeates many consumer contracts and agreements. John Q Citizen often never realizes what he signed and agreed to when engaging with certain businesses.


Many of you are familiar with traditional methods of tort reform—legislative measures lobbied into law by the U.S. Chamber of Commerce and many right wing legislators seeking to restrict a citizen’s right to sue. We see these efforts introduced and passed in state after state, seeking severe limits on citizens’ damages recoveries in product liability and medical malpractice cases. It's been pushed in Congress by Republicans for years.


Forced arbitration is yet another method of tort reform—it seeks to settle disputes out of court, without judges or juries. Now arbitration often is a good way to settle disputes. When two parties agree to arbitration and voluntarily submit to the process, good things usually happen.


However, forced arbitration is a back-handed method of requiring a consumer or employee to waive their right to sue, participate in a class action lawsuit, or appeal an arbitrator’s unreasonable or legally unsupported decision. Worse, the process is mandatory, even though the wronged party likely was not aware he or she had agreed to it. Further, the results are private, so others who were similarly harmed will not be aware of them, and the results are legally binding on the consumer or employee

.

Arbitrators rule in favor of employers or businesses in almost every case. This is because a single arbitrator often receives many cases from one source and does not wish to lose that company’s business. According to a recent New York Times report, forced arbitration typically delivers “favorable outcomes to companies . . . twists and disregards the law.” Studies by the Consumer Financial Protection Bureau and the Alliance for Justice recently concluded that approximately 93 percent of arbitration cases are ruled in favor of businesses.


What’s the bottom line?

Companies choose forced arbitration because it benefits them. Before President Biden signed HR 4445 into law, employees who inadvertently signed an arbitration clause could not sue for discrimination due to sex, age, disability, or race. Even with this new law, many consumers cannot sue for harm caused by defective or dangerous products, scams, or negligence. Forced arbitration takes away the rights and liberties of employees and consumers, leaves them completely vulnerable to harm or unfair treatment, and makes each of us less safe.


Forced arbitration is especially effective in class action litigation. Most clauses ban class action lawsuits, preventing consumers from combining claims that are too small to justify litigation costs. In essence, forced arbitration offers corporations a free pass to do small amounts of harm to large numbers of citizens. The best example of these types of clauses are found in credit card agreements and disputes. On a larger scale, these clauses are creeping into nursing home and hospital consent-for-care agreements as well as many employment contracts.


This is why President Biden’s signature on HR 4445 is so important. Corrective legislation is, perhaps, the only way to make these clauses illegal and restore employees’ and consumers’ rights to litigate such disputes.


We need more corrective legislation in this area. Recent cases involving Wells Fargo, Equifax, and others, where fine print clauses eliminate consumers' rights to sue or join class actions demonstrate the need for similar legislation. Otherwise, the courtroom doors will remain padlocked to the average consumer.


These days, consumers and employees are forced to choose between getting a job and signing an arbitration agreement, establishing or using credit or credit cards, establishing a banking relationship, purchasing healthcare, vehicles, or auto and homeowners’ insurance. Agree to any of these relationships and you have probably signed an arbitration clause.

Some companies (as usual) go too far—lawyers and consumers groups have successfully mounted court challenges to prove that some “hidden” or “fine print” clauses are unenforceable. Payday lenders, credit reporting agencies, and smartphone providers are a few of the examples.


It is high time for Capital Hill to go all the way on these issues. Most citizens have no idea their rights are being taken away until they are wronged and begin to investigate their legal options. Congress and the president need to put an end to all uses of forced arbitration.

Mark M. Bello is an attorney and award-winning author of the Zachary Blake Legal Thriller Series, ripped-from-the headlines, realistic fiction that speak truth to power and champion the rights of citizens in our justice system. These novels, dedicated to the social justice movement, are not only enjoyable, they educate, spark discussion and inspire readers to action. For more information, please visit www.markmbello.com. Mark also hosts the Justice Counts podcast with Lean to the Left editor & publisher Bob Gatty, presenting bi-weekly interviews focused on social justice.


17 views0 comments

Recent Posts

See All
bottom of page