Check Out Fine Print

Published on

Fort Lauderdale Sun-Sentinel

Don’t look now, but you’ve probably signed away your right to sue your credit card issuer, broker, long distance company and health maintenance organization.

Mandatory arbitration clauses, which force consumers to submit complaints to binding arbitration boards and prohibit them from going to the courts, have swept American commerce.

Trial lawyers and consumer groups hate these clauses. They are often buried so deep into contracts that consumers accept them — sometimes by making long distance calls or using their credit cards — without ever realizing it.

They force consumers to surrender their rights to sue, to join in class-action suits, and, in some cases, to recover court costs or punitive damages — even if they win a claim.

Opponents of the mandatory arbitration clauses claim that many of the organizations that run the supposedly independent proceedings are too beholden to the corporations they often judge. They also point out that arbitration, though put forth as cheaper and quicker than legal cases, can actually require that complaining consumers lay out much higher amounts of money to pursue their complaints.

Proponents of arbitration, such as the 11,000-member American Arbitration Association, say that arbitrators are impartial and allow consumers to have their grievances aired quickly and cheaply. The cost to consumers for arbitrating a complaint worth less than $10,000 are capped at $125, said a spokeswoman for the group.

Many court decisions in the past — including some by the Supreme Court– have validated these clauses. But most recently, a couple of cases reined them in.

In California last month, a U.S. district court found that the mandatory arbitration clause contained in AT&T‘s long distance service contracts was unfair, because it went beyond simply requiring arbitration and also limited the scope of remedies consumers could get and required that the proceedings be

kept secret.

In a similar ruling, a federal appeals court found that the arbitration

clause included in Circuit City’s employment contracts was lopsided and not legally justifiable.

“Consumers can just try crossing out and initialing arbitration clauses whenever they show up in contracts, suggests Jamie Court, executive director of the California watchdog group, Foundation for Taxpayer and Consumer Rights.

“Keep a copy; it demonstrates that the firm doesn’t have a mandatory arbitration agreement with you.”

If you can’t get out of the arbitration, it would be good to work with a lawyer, but you’re not too likely to find one: Most consumer liability

lawyers work for the big awards; they can’t afford to do cases (and you can’t afford to pay them) for the smaller amounts that arbitration panels more typically award.

Linda Stern is a freelance writer who covers personal finance issues for Reuters. E-mail her at [email protected].

Consumer Watchdog
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