Many Americans are unknowingly stripped of their rights when they sign up for health insurance, cable television or credit cards. Buried in the fine print of these contracts are clauses that force harmed consumers into a private system that is stacked in favor of giant corporations – sometimes with devastating consequences (see the comments). Binding mandatory arbitration clauses are proliferating in contracts everywhere.
But now we can tip the scales back in favor of consumers. Yesterday, Senator Russ Feingold (D-Wisc.) and Representative Hank Johnson (D-Ga.) introduced a groundbreaking legislation to restore the rights of millions of consumers, the Arbitration Fairness Act. This measure bans the use of binding mandatory arbitration in employment, consumer, franchise or civil rights disputes.
Public Citizen’s President Joan Claybrook had this to say at today’s press conference:
Let me be blunt. Privatizing justice benefits big corporate interests like national banks and insurance companies but does not help ordinary people. Corporations have figured out that simply by inserting an arbitration clause in contracts for everyday consumer goods and services or employment, they can usually evade accountability for any harm they cause or laws they break — laws meant to protect consumers and employees from the misuse and abuse of corporate power in the marketplace.
How? First, the contracts are take-it-or-leave-it, so individuals have no choice but to accept the arbitration clause if they want the product, service or job, even if they are required by law to buy the service, as is the case with auto insurance, or required by life’s uncertainties to purchase a much-needed service like health insurance.
Second, the lack of any meaningful independent review of arbitration decisions creates a climate ripe for abuse. The arbitration process is secretive and, of course, the courts have little involvement. Companies impose arbitration on consumers to keep their corporate misbehavior hidden from the piercing sunlight of our public civil justice court system.
Third, arbitration companies are beholden to big corporate players for repeat business, which creates a bias. They do not bite the hand that feeds them. For example, public data show that in the portfolio of one California arbitrator who ruled in 532 cases, 526 were in favor of business — a mere 1.14 percent for the ordinary consumer.
Fourth, arbitration is costly: The more you play, the more you pay, which denies justice to many who cannot afford to play on an already uneven field.
The Arbitration Fairness Act of 2007 would change that terrible anti-consumer landscape. If we are to have any hope of restraining powerful corporate interests from abusing their overwhelming market power to the detriment of individuals, families, workers and whole communities, it must change. We cannot simply trust companies to do the right thing.