On Friday DMI posted an op-ed by Senator Russell Feingold (D-Wisc.) in which he explains the dangers for consumers of business-mandated arbitration. Senator Feingold has demonstrated an impressive understanding of the problems that arbitration poses for consumers ever since he wrote very eloquently on this topic in 2002. In his most recent piece, Senator Feingold makes several forceful points about the nefarious aspects of involuntary consumer arbitration:
- "Arbitration should be a choice, not a mandate. It is only an adequate alternative to the courts in cases when both sides are willing participants."
The practice of foisting arbitration upon the public through consumer contracts eliminates the right of the public to make a free and informed choice. Consumers rarely read arbitration clauses because they are often buried deep in long form contracts. In the event that consumers are able to locate arbitration clauses, they are typically composed in such complicated language that it is unclear what the average person is agreeing to. Consumers also cannot adequately compare all of the costs and benefits of arbitrating some abstract, prospective dispute with their immediate need for the service that they are seeking (a phone, internet, cable TV, a car, a credit card, a computer, etc., etc.). This is hardly a knowing, voluntary waiver of one’s right to a civil trial before a jury of one’s peers, and yet Americans are coerced into signing away this right on a regular basis.
- "There’s nothing fair about some of the arbitration proceedings that consumers are forced into. A major arbitration firm actually advertised its services by pointing out how arbitration favors its corporate clients because arbitrations are secret, and consumers or employees have very limited rights to discovery and might even have to pay the costs of the arbitration if they lose."
While there are many problems with arbitration procedures, the following may be the most harmful to consumers: 1) the small number of arbitration companies and their financial incentive to rig the system in favor of business, 2) the pervasive bans on class arbitration/litigation contained in consumer contracts, and 3) the narrow scope of judicial review of arbitrators’ decisions. In an attempt to head off efforts to ban arbitration, pro-business forces have gone on the offensive through a bill to reform arbitration procedures proposed by Senator Jeff Sessions (R-Ala.). This bill is not the consumer-friendly legislation that it claims to be, as it basically restates existing state law and does nothing to address the most harmful aspects of arbitration. Does it matter that you have received notice of a hearing if, at that hearing, the arbitrator is a client of the adverse party, there are no rules, and the arbitrator’s decision essentially cannot be overturned? Consumers will only be helped if the uneven playing field created by forced arbitration is truly leveled.
As Senator Feingold concludes, "[t]he rule of law means little if the only forum available to those who believe they have been wronged is an alternative, unaccountable system." Until the fundamental unfairness of forced arbitration is remedied, the only adequate solution for consumers is to ban this abusive practice. In the interest of United States citizens and consumers, Congress should support any effort to prohibit pre-dispute binding mandatory arbitration, including the Arbitration Fairness Act, S. 1782 and H.R. 3010.