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You're Getting Ripped Off By Forced Mandatory Arbitration -- Here's How to Stop It

If you've ever opened a credit card, rented a car or engaged in any number of other routine interactions with big corporations, you've probably had to sign away your right to go to court or band together in a class action with other customers.
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Businesswoman writing on paper at desk
Businesswoman writing on paper at desk

Forced arbitration rigs the game in favor of big corporations and against consumers and employees. And recently, a New York Times investigation has exposed just how prevalent this damaging practice is; indeed, the story almost certainly affects you, personally.

If you've ever opened a credit card, rented a car, or engaged in any number of other routine interactions with big corporations, you've probably had to sign away your right to go to court, or band together in a class action with other customers. Instead, you have legally (if unwittingly) agreed that, if a dispute occurs, you will seek justice only through a secret, profit-driven arbitration process -- one in which no comprehensive records are kept, no meaningful appeals are allowed, and the arbitrator likely has significant financial incentive to rule in favor of the corporation.

That arbitration clause was likely buried deep in the fine print in a lengthy terms-of-service agreement. Even if you had read (and correctly interpreted) the entire contract, and decided to take your business elsewhere, odds are you would have seen the same clause in every competing company's terms-of-service agreement, too. Consumers are left with no real recourse: you sign, or you do without a cell phone, or cable TV, or Internet service.

Now, imagine facing the same dilemma when placing a loved one in a nursing home -- or even looking for a job. Believe it or not, more than 30 million American workers are bound by forced arbitration clauses as a condition of their employment.

Make no mistake: These clauses, which are practically impossible to avoid, are designed to make it easier for big corporations to break the law and rip you off without facing any real consequences. It's unbelievably unfair. And it shouldn't be legal.

That's why we have introduced the Arbitration Fairness Act, which has been co-sponsored by 16 Democrats in the Senate and another 74 in the House. Our legislation doesn't ban arbitration. If both parties want to arbitrate instead of going to court, they can. But you would get to make that decision after a dispute arises. Corporations wouldn't be able to force you to preemptively waive your right to go to court or pursue a class action -- often your only real avenue for holding these giant companies accountable.

Congress isn't the only place where we can level the playing field. Earlier this month, the Consumer Financial Protection Bureau (CFPB) announced it was considering a proposal to ban arbitration clauses that block class action lawsuits in consumer financial contracts. While we would like to see the CFPB go further and eliminate the use of forced arbitration clauses altogether in consumer financial service contracts, this proposed rule would be a big win for consumers.

Meanwhile, the Centers for Medicare and Medicaid Services (CMS) has proposed reforming its requirements for long-term care facilities like nursing homes, acknowledging the negative impact of these clauses on residents and suggesting some ways to make these clauses more transparent and easier to understand. That is a start. But forced arbitration clauses have no place in these agreements, and we urge CMS to ban them altogether.

We are hopeful that these processes will result in real progress for consumers. But the law requires that any CFPB proposal must undergo an arduous review before being finalized and implemented, and CMS, which has already received thousands of comments on their relatively modest proposal, will likely engage in a lengthy rulemaking process, as well. And that leaves plenty of room for the Chamber of Commerce and other corporate-backed pressure groups to make their mark. It's up to ordinary Americans everywhere whose rights are at stake to weigh in, as well.

There's one more arena where this fight will play out: the Supreme Court. After rulings this summer to protect health insurance subsidies and make marriage equality the law of the land, many thought that perhaps concerns about the Roberts Court's conservative bent were overblown.

But, as the Times revealed, Roberts himself was a driving force behind the creation of the forced arbitration scheme a decade ago. And in a long series of 5-4 decisions, including the two that paved the way for these unbelievably unfair forced arbitration clauses, he and the other members of the Court's conservative majority have systematically slammed shut the courtroom door on millions of Americans.

These cases may not garner the same headlines as those involving public displays of religion or government surveillance, but they affect the rights, and the pocketbooks, of nearly all of us -- something to keep in mind when evaluating not just the current Court's record, but also future nominees.

Americans are beginning to understand that the game is rigged. Now we must take action to level the playing field.

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