Arbitration clauses are buried in the fine print everywhere — credit card agreement, cell phone contracts, employee handbooks, health insurance plans, and franchise agreements. No one cares — until they have a dispute. Once they get over-billed, or discriminated against, or cheated, they discover that they have waived their legal remedies. Instead, they have to pay high fees and they may have to travel to a distant forum only to appear in front of an arbitrator who is far more likely to rule for the company than for the individual. That’s the news from a comprehensive new report on arbitration issued today by Public Citizen.
The big push from Public Citizen raises a central political question: In a business-versus-consumer choice, will Congress pass any consumer measure? Does industry still own the legislative process?
We’ve talked before about the studies showing systematic bias in arbitration. The most frequently chosen arbitrators rule for the companies 98.4% of the time. After serving as an arbitrator, former judge Richard Neely described arbitrators as “Godless bloodsuckers.” Senator Russ Feingold has introduced legislation to end mandatory arbitration against consumers.
The pieces are in place: Public Citizen has picked a good target, and they have written a superb report. They will kick off with a big press conference featuring Senator Feingold (D-Wis), Representative Hank Johnson (D-Ga) and others.
But any anti-arbitration initiative faces real problems. Mandatory arbitration clauses are hidden in the fine print. Most of us don’t even know we are subject to them until we have a problem. Arbirtation doesn’t sound bad — it sounds cheaper and fairer and more informal than going to court. And, most important for the legislative process, the industries that use mandatory arbitration have a lot more money for lobbying campaigns and make a lot more political contributions than the consumer groups. (Is it any surprise that Russ Feingold, the sponsor of a campaign finance reform effort, would also be the sponsor of a pro-consumer bill on arbtration? He’s one person in Congress who isn’t getting big donations from PACs.)
Consumers take it on the chin every day with hidden tricks and traps in credit card agreements, home mortgages, health insurance contracts, and dozens of other purchases. Public Citizen has focused on one way to clean up the fine print in those contracts. Will Congress listen?
