Recently, the American Association for Justice issued an important report outlining how often Americans are forced into arbitration agreements with companies that have attempted to stack the deck against consumers. Though many people are unaware, the vast majority of contracts signed by consumers now contain arbitration agreements hidden somewhere in the fine print. This can spell trouble for consumers who may unknowingly waive their right to bring a civil suit, instead settling for an arbitration system that has been designed to favor corporate interests.
Many people would be shocked to discover how widespread these arbitration clauses are. Despite a general lack of public discussion, arbitration agreements are now frequently tacked onto credit card contracts, nursing home agreements, online user notices, software licensing agreements and even things like employee handbooks.
There are several problems with this growth in arbitration. First, much of it occurs in cases where consumers have no actual knowledge that they have forfeited their right to bring suit, only discovering the hidden clause when things go wrong. Another problem is that when something does go wrong, rather than have a company face the consequences of their actions in a public setting like a courtroom, these arbitration clauses allow “justice” to be dispensed in secret, often in settings that have been handpicked by corporations to ensure that their interests are best served.
By continuing to narrow down the options for injured consumers to seek justice, corporations are being given more opportunities to behave irresponsibly. Arbitration allows companies to avoid taking full responsibility for products or decisions that leave consumers injured or even dead. Additionally, because the proceedings are conducted under a veil of secrecy, the unsuspecting public has no way of knowing the danger posed by some products, creating a potentially deadly lack of public accountability.
The AAJ provided the example of one person who has suffered due to a hidden arbitration agreement. The case concerned an 86-year-old woman who lost nearly $300,000 after an investment adviser at Morgan Stanley convinced her to sell her property and use the money to bet on risky stocks that came with high transaction fees. The woman tried to sue Morgan Stanley, but discovered that she had signed an arbitration agreement. Though she ultimately “won” the dispute, the AAJ notes that the woman was awarded only $5,000 from the arbitrator and was then assessed $10,350 in arbitration fees.
To help raise awareness of the serious problem, the AAJ has put together a primer for consumers titled, “License to Steal: How the U.S. Chamber Forced Arbitration on America.” The report discusses how the U.S. Chamber of Commerce is leading a campaign to broaden the use of arbitration agreement and how this effort harms the interest of consumers and small businesses.
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