Mandatory Arbitration Hurts Consumers, Favors Businesses

Bills are being floated in Washington D.C. to address the growing disparity between consumers and businesses because of mandatory arbitration clauses which prevent consumers from taking disputes to a court of law.

At issue is the fine print in many contracts for goods and services, such as credit cards and cellphones, requiring that disputes be submitted to arbitration by a third party. Critics of the provisions say they deny consumers and employees a basic American principle: the right to go to court.”People from all walks of life — employees, investors, homeowners, those enrolled in HMOs, credit card holders and other consumers — often find themselves strong-armed into mandatory arbitration agreements,” said Sen. Russell D. Feingold (D-Wis.), who is sponsoring one of the measures aimed at making arbitration voluntary rather than mandatory.

Many lawmakers say mandatory arbitration has tipped the playing field in favor of businesses. Public Citizen, a Washington-based consumer watchdog group, reported that consumers won 4% of 19,000 California cases decided by one arbitration firm between January 2003 and March 2007. The study found one arbitrator who rendered 68 decisions in one day — “one every eight minutes,” said Laura MacCleery, director of the consumer advocacy group Public Citizen’s Congress Watch. “Consumers won zero.”

During a hearing Wednesday on Feingold’s bill, Sen. Sam Brownback (R-Kan.) said, “The fact of the matter is that the little guy is, by and large, better off in arbitration than trying to get to court. Arbitration is cheaper than litigation, and it leads to faster results for plaintiffs.”

Whoa there, Senator. You’re either wilfully ignorant, woefully misinformed, or just flat-out being dishonest with that statement.