Corporate Arbitration Depriving Consumers of Important Rights
Arbitration agreements show up in virtually every sphere of business, from credit card agreements and cable television, to car rentals and even Starbucks coffee.
Disputes are often decided by corporation-friendly arbitrators whose fees are paid by the companies who disputes they are deciding. One report says that when an arbitrator found in favor of a consumer, he was unable to get any more arbitration work from companies.
Arbitration clauses also typically prohibit consumers from bringing class actions. Systemic change is often only accomplished by class actions that, as part of settlement, require companies to change the widespread policies that brought about the lawsuits.
Consumers are instead reduced to bringing their cases individually. The cases brought as class actions are often over small amounts that are not feasible to sue over unless there is a class action. As one federal judge remarked in an opinion, “only a lunatic or a fanatic sues for $30.”
Some state judges have called the class-action bans a “get out of jail free” card, because it is nearly impossible for one individual to take on a corporation with vast resources.
State regulators say arbitration deprives them of an important mechanism for dealing with patterns of corporate abuse. In a letter last year to the Consumer Financial Protection Bureau, attorneys general in 16 states warned that “unlawful business practices” could flourish with the proliferation of class-action bans.
A three-part series from the New York Times highlights these problems: