How many times have you signed a contract without reading the fine print and thought to yourself, “I wonder what I just signed?” If you’re like most consumers you do it all the time, crossing your fingers that you didn’t sign something you shouldn’t have.
You probably assume it’s some standard language companies have to put in there, and for the most part you’re right. But remember a contract is generally created to protect the person who wrote it. Over the past few years virtually all types of businesses have been inserting what’s known as “binding mandatory arbitration clauses” into the contracts most people sign without reading.
What does that mean to us?
It means we just signed away our right to a courtroom trial should we want to sue the company, or should they want to sue us. Instead, we must appear in front of a panel of arbitrators, usually ex-judges and lawyers that will decide the case.
Sound like a court case? It’s not. The panel’s rulings are final and generally cannot be appealed. What’s more, businesses win 94% of all arbitration cases over consumers. The average person has almost no chance of winning.
The Minnesota Attorney General, Lori Swanson, thought the situation so unfair she sued one company and found an extensive financial relationship between credit card companies and the arbitrators. The company agreed to stop handling credit card arbitrations.
Arbitration clauses can be found in virtually every consumer contract from credit cards to cell phones to vehicle purchase agreements. Nursing homes have even begun using this tactic as a means of limiting their accountability in cases of neglect, abuse or wrongful death.
In response to the tactics being used by many businesses to protect themselves at the expense of consumers, several bills have been introduced in the U.S. Senate. Both bills are led by our Wisconsin Senators.
Sen. Russ Feingold introduced the Arbitration Fairness Act (S.931/HR 1020) to aid consumers. As he accurately pointed out, “Arbitration can be a fair and efficient way to handle disputes, but only when it is entered into knowingly and voluntarily by both parties. People from all walks of life… often find themselves strong-armed into mandatory arbitration agreements. We need to make sure that all Americans can still have their day in court.”
Sen. Herb Kohl is leading an effort to protect nursing home residents from mandatory arbitration clauses. Sen. Kohl’s bill (S 512/ HR 1237) aims to prevent nursing home corporations from forcing residents and their families into arbitration through a non-negotiable contract entered into prior to the dispute. It will ensure that arbitration is voluntary and not a coerced method to resolve disputes.
While these bills are being debated, there are efforts you can take to protect your rights.
1) Look for words that indicate you are waiving your rights. These might include: All disputes, controversies, or claims arising out of or relating to this contract shall be submitted binding arbitration …Binding arbitration means that the parties are waiving their rights to a trial, including their right to a jury trial, their right to a trial by a Judge and their right to appeal a decision of the arbitrators.
2) Strike arbitration clauses from contracts. If you see something in a consumer contract you don’t like, try crossing it out before you sign it. The business doesn’t have to accept the change, but it’s worth a try.
3) Support businesses that don’t reduce your rights through arbitration.
4) Contact your elected officials and tell them to support efforts to curb binding mandatory arbitration.
Most of all, know your rights. You never know when you might need them.
Mark L. Thomsen is the President of the Wisconsin Association for Justice, the state’s largest voluntary bar organization. WAJ is committed to a fair and effective justice system that ensures justice for all, not just the privileged few.