What You Can Do To Fight
Binding Mandatory Arbitration
Consumers can take some measures to protect themselves. They should be aware that the fine print in consumer contracts may include a clause stripping away their rights and forcing them into expensive binding mandatory arbitration. Once a service or product is provided, consumers have few options. To avoid being trapped by a binding mandatory arbitration clause, consumers should:
- Use Credit Cards with Care:
- Educate yourself. First and foremost, read credit card terms to discover whether it contains a binding mandatory arbitration agreement. If it does, terminate the card when you can and cite the BMA clause as your reason.
- If obtaining a new credit card that includes BMA, sign an arbitration opt-out if one is available.
- Try to obtain a credit card that does not require binding mandatory arbitration. AARP says its cards do not require the clause. Some small banks and credit unions also do not require arbitration clauses.
- Pay attention. If you receive a change-of-terms document in the mail, read it carefully. Check the contents of the envelope with your monthly statement to assure there has not been a change. If the proposed change is unclear to you, call the card issuer and demand an explanation. Any changes that you do not approve can be rejected by not using your card again.
- Reduce credit card debt as much as possible to avoid costly fees, penalties and credit disputes.
- Examine All Consumer Contracts for Arbitration Clauses: Read ALL of
the fine print before signing a contract – especially one for a credit card, mortgage, installment loan or new car.
- If applying for an installment loan or buying a new car, make sure the loan agreement (and, in the case of a car, the purchase agreement and loan agreement) does not include an arbitration clause. If it does, opt-out or walk away from the deal. Consider financing the car through a credit union that does not require BMA.
- If you are looking for a mortgage, make sure the lender does not require BMA. Seek a mortgage that qualifies for a Fannie Mae or Freddie Mac loan. Neither organization allows BMA.
- Put Up a Fight:
- If you receive a notice that a company has filed an arbitration case against you, do not ignore it, even if you know that there is a major mistake. Respond immediately in writing and send the response by a method that requires a signed delivery receipt. If you do not get a response to your response, do not assume that your explanation has been accepted. Demand a response. Also, seek legal help. The National Association of Consumer Advocates (NACA), a nationwide organization of more than 1,000 attorneys who represent and have represented hundreds of thousands of victims of fraudulent, abusive and predatory business practices, may be able to help you find a lawyer. Go to the NACA Web site and click on “Find an attorney” on the home page. You can also contact NACA at (202) 452-1989.
- Help organizations like Public Citizen, the StopBMA Coalition and the Americans for Fairness in Lending coalition to ban binding mandatory arbitration. Support efforts in Congress to exempt consumer and employment contracts from binding, mandatory arbitration. Write to your members of Congress urging them to support S. 1782 and H.R. 3010, the Arbitration Fairness Acts of 2007.
From The Arbitration Trap: How the Credit Card Companies Ensnare Consumers, Chapter IV.
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