9 Reasons To Ban Mandatory Binding Arbitration

Mandatory binding arbitration is great for businesses to use in dealing with one another, but it sucks for consumers. Here’s 9 ways you get screwed in arbitration land, courtesy of the National Association Of Consumer Advocates

High cost: You have to pay a bunch of money, usually at lest $750, just to start a claim.
Biased Arbitrators: Companies are the only repeat customers of arbitration firms so guess who the arbitrators usually find in favor of?
Limited discovery: Good luck getting the necessary evidence in the room.
Prohibition of class actions: Arbitration clauses routinely don’t allow you to participate in a class action lawsuit, “only effective remedy for wide-scale scams that rip off individual consumers or farmers in small amounts.”
Inconvenient locations: Gas dollars rack up as you trek to their out-of-the way offices.
One-way requirements: The company still gets to sue in a real court if it wants, you however have to go through arbitration monkey court.
No public record: Only businesses requiring arbitration agreements have access to the body of previous arbitration findings — and which firms ruled in their favor.
Limited judicial review: Decisions can only be overturned in cases of fraud or “manifest disregard of the law,” very difficult legal positions to establish.
Limited remedies: “Injunctive relief – a court order compelling the offending party to do something, or prohibiting that party from taking some action – cannot be obtained through arbitration. Arbitrators often split the difference between the two sides in awarding damages instead of determining the true costs of injuries. As a result, arbitration awards to consumers and employees are substantially lower than court awards.”

And that’s nine reasons why you should support the Arbitration Fairness Act.

Ban Mandatory Binding Arbitration [National Association Of Consumer Advocates]
(Photo: Getty)

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  1. Pinhedd says:

    There was a state court ruling MBA as being unconscionable, I believe it was in california.

  2. Chris says:

    This is about 80% nonsense. It’s comical.

    There are many reasons why arbitration may be less than ideal for a consumer, but this list just insults the intelligence.

    Arbitration “racks up” gas dollars? Seriously? Every arbitrator I know was located in major business/legal centers (I litigated in California from ’99 until last month).

    The “one-way requirement” thing is a total red herring, too. No court enforces a one-way arb provision.

    No public record — also b.s. First, arbitration awards are confidential as to everyone. It’s not like SBC can call over to the arbitrator and get copies of Verizon’s abitration rulings. In any event, it’s a moot point: Prior arb decisions aren’t citeable precedent. The results of a prior arbitration decision are of very little use to either party.

    Like I said, there are a couple decent points buried in this dreck (which was prepared by a astroturfing plaintiff’s attorney group). There is some evidence that “repeat players” receive more favorable results (though arbitrator bias has never been isolated as a cause).

    Mainly, though, the beef with all this is with the arbitration provision’s ban on class actions. That’s what has the plaintiff’s bar in a lather. At some level, the availability of class actions is supposed to help Joe Consumer, by enticing attorneys to take his small case.

    But the reality is that class actions are terrible for the named/representative plaintiff; terrible for anyone else who was actually harmed by the practice (they get pennies on their actual dollar); decent for the unharmed class member (free $$); decent for the defendants (settle all claims at once); and great for the plaintiff class attorney.

    And that’s one to grow on.

  3. zolielo says:

    I thought that it was already covered, by posters, that arbitration is a mixed game but often optimal. Oh Ben…

  4. Crazytree says:

    we’re in a unique time in American history.

    the corporations have gone to the extreme, and are trying everything in their power to fuck the consumer. I mean my wife’s Vogue magazine is 840 pages… 90% of which are advertisements!

    we’re reaching the tipping point… and stupid bullshit like mandatory binding arbitration agreements. this is the material that Republican wet dreams are made of.

    I’m sorry to get political… but Democrats are the only party that has EVER done anything for the average consumer.

    The overhaul of the BK laws two years ago by the GOP is the perfect example of consumer interests taking a back seat to the corporate rape of the US American consumer.

  5. olegna says:

    >> but Democrats are the only party that has EVER done anything for the average consumer. <<

    HAHAHA! I suggest you look up the Democrats that voted FOR the Bankruptcy Reform Bill.

    I wonder if Hilary Clinton will grow a pair of testicles and actually make a stand on this one. (On Bankruptcy Reform she abstained because voting for it would have alienated her constituency and voting against it would have alienated the big corporate interests that give her lots of money (JP Morgan, Citibank, etc.). By the way: these interests are increasingly backing Democrats these days — this is cyclical, they tend to switch back ad forth. The Democrats are only slightly less evil than the Republicans when it comes to accepting legalized bribes for legislation.

  6. shelleyp says:

    Some agreement with previous posters, some not.

    First of all, this act strikes mandatory arbitration clauses. People can still enter arbitration if they wish. This isn’t anti-arbitration, this is anti-mandatory arbitration, and anti-hidden mandatory arbitration clauses.

    Secondly, the one way arbitrations usually fail in court, true, as unconscionable.

    The fee issue is very real — I went through a so-called ‘arbitration’ where the company filing the claim would not claim attorney fees (not part of the agreement) but the arbitrator tacked on 7000.00 in lawyer and arbitration fees. This for an arbitration that occurred through the mail and took about ten minutes of the company’s time. Fair? Cheap? Wow, is that ever a lie.

    The lack of transparency is a huge one. The arbitrator can rule one way or another based on whim, and unless you can prove that they deliberately flouted the law or someone used deliberate fraud, it’s very difficult to get these overturned.

    When people challenge the arbitration proceedings because of lack of valid arbitration agreement, as described in the FAA, the law states that the person filing the arbitration complaint should then take this to court to compel arbitration. For all of the arbitration companies, if you protest, or state that there is no valid arbitration agreement, you’ll be ignored. I can guarantee this one.

    Arbitration companies do rule in favor of repeat customers. In addition, by the nature of bringing about many suits, companies do have information about which arbitrators ‘favor’ them, which don’t. It’s more or less rigged.

    Companies commit fraud, provide little or no documentation, and don’t follow the arbitration company’s own rules with most of the commercial arbitration companies like JAMS, NAF (the worst), and AAA. Yet arbitrators still rule in their favor.

    There was a thing recently where a lawyer appeared with her client at an arbitration meeting, and MBNA, the company, blew off the meeting. Yet arbitrators still rule in MBNA’s favor.

    Most state laws require that arbitration be held close to where a person lives. This is usually not an issue. It doesn’t need to be — all the other problems are enough to make mandatory arbitration an abusive practice that must end.

    The Federal Arbitration Act was never intended to be used by companies against individuals. It was Scalia’s controlled Supreme Court (yes, Scalia controlled) that stripped American rights, because the court systems can’t be ‘bothered’ with people like you and me.

    Frankly, any congressional representative who doesn’t vote for this bill, has been bought off by big business. That’s also something I can guarantee.