Binding Mandatory Arbitration has become a popular form of dispute resolution in all types of contracts. It appears in home mortgages, credit card contracts, employment contracts and employee handbooks that act as contracts, installment contracts for automobile purchases, contracts for cable television service and a myriad of other consumer and business contracts. The average American, in accumulating its share of the nearly 2.5 trillion dollars of consumer debt reported by the Federal Reserve Board, is bound by at least one and usually several contractual obligations to use binding arbitration to settle disputes. Most of them do not even know it.
Most consumers do not know that they voluntarily gave up their Constitutional right to a trial by jury for disputes greater than $20.00. A fundamental right protected by the Bill of Rights in the Seventh Amendment can be waived by a simple clause buried in the fine print of an agreement to extend credit for a wide variety of consumer purchases. A fundamental right can be bargained away without the employee even knowing it happened. If the right to free speech or to practice religion was being bargained away in the fine print of these contracts there would be a citizen, media, and congressional uproar, but the relinquishing of this right has until recently been completely ignored.
Congress finally held hearings on this practice in June of 2007 and a bill in response to these hearings was introduced in both houses in July of 2007. Someone finally took notice of the abuse of a fundamental right by businesses against consumers. This notice may be short lived. Both bills have gone to their respective houses Judiciary committees for debate that has not even been scheduled yet. More than two months after the bills were introduced no further action has been taken and if Sen. Thomas R. Carper (D-Del.) is any indication then the legislation will not go forward. He dismissed the possibility of the legislation because banking industry opposition makes it "hard to get anything passed today."
Why is this legislation needed? It is needed because this right is being given away casually with disastrous results for the consumer. The companies that require arbitration from consumers are the primary source of business for the firms that provide arbitrators. We have all heard the adage that "the customer is always right." Well a new study published in Public Citizen reveals that the arbitration firms customers are the businesses that put arbitration clauses in their consumer contracts and the customer is right in these arbitrations over 90% of the time. Consumers are unwittingly bargaining away a right protected by the Seventh Amendment in exchange for a forum where they are going to lose 9 out of 10 times.
Those odds are like Appalachian State going to play Michigan at the Big House. Yeah they can win, and even have won, but I wouldnt count on them winning again for a long time.
