Most consumers are unaware of arbitration clauses that are buried in agreements or contracts that they must enter into with entities such as a cell phone company, a bank, a cable company, an internet service provider, a gym, or even when they go to a doctor or hospital or take a new job. These clauses state that a consumer gives up their right to file a claim against the company in a court of law and instead must submit their claim to arbitration. Arbitration is a loosely defined term for a non-court forum for resolving disputes. It has proven very one-sided, strongly favoring corporate interests and disfavoring consumers, and, unlike a court decision, the arbitration cannot be appealed.
Some arbitration clauses are even more one-sided, stating that the company has complete discretion in choosing who the arbitrator(s) will be. Some corporations also include language in the agreement/contract specifying a required location that is far-off for the consumer where the arbitration must occur. Frequently the contract/agreement contains language prohibiting bringing a claim as part of a class action, and class actions are often the only way a consumer has to address illegal corporate behavior without much individual monetary value.
With so many clauses in contracts, one would think that by now a lot of consumers would have brought their claims through arbitration. But this is untrue. Only about 1,000 cases were brought nationally in 2009 and 2010. Arbitration only gives the illusion that there is another means for consumers to have their claims heard. This is why The Consumer Financial Protection Bureau, as required by the Dodd-Frank Act, is studying these clauses, examining their overall prevalence, consumer awareness and understanding of these agreements, how often consumers decide to bring claims, and the type of language being used in the clauses.
On July 31.2014, President Obama signed the Fair Play and Safe Workplaces executive order, which, among other things, bars employers from forcing workers to bring workplace discrimination, sexual assault, or sexual harassment cases only through arbitration. Instead, these cases can only be arbitrated with the consent of the parties after the dispute arises. Surprise mandatory arbitration clauses contained in employment contracts are ineffective in these situations.
Recently, the Attorney Generals from sixteen states, the chief consumer protectors of their states, have requested of the Director of the U.S. Consumer Financial Protection Bureau to protect consumers’ fundamental Constitutional right of access to court by the Federal government adopting rules that protect consumers from mandatory arbitration clauses when financial products, such as a credit card, payday loans, and checking account agreements are at issue. Unfortunately, Florida’s Attorney General is not one of the sixteen.
As part of its work on behalf of consumers, Terrell • Hogan currently is prosecuting a consumer case against a Bank asserting that arbitration is not mandatory and should proceed in court.