What You Need to Know About Forced Arbitration Part 1: What You Lose When You Sign

This is the first blog post in a series about forced arbitration (also called mandatory arbitration)

It all happens so fast. One minute you’re thinking about signing up for the latest new phone contract – or checking account, apartment lease, credit card, gym membership, even social media account and the next? You’ve signed your name and you’ve "agreed" to the arbitration clause, whether or not you even know what arbitration means.

Listed among a sea of other disclaimers, warnings or warranty information, forced arbitration clauses are usually a small paragraph within the fine print that do away with your right to file a lawsuit if you were harmed by said product or service.

Not sure what we’re talking about? That’s the point: Forced arbitration is like a hooded thief, no one knows who he is or even sees him coming – it’s only after the damage has been done that you truly recognize what happened, and how badly you’ve been hurt.

Here’s a simple definition of forced arbitration: No right to a lawsuit. When you sign up for the product or service with a forced arbitration clause, it means you cannot fight back through the legal system no matter how severe a product or service might harm you.  Instead, you can only fight back through a process called arbitration – a process that is heavily biased towards the product or service provider and is so expensive and time-consuming that many state judges have called the arbitration system unethical.

Have you read about big-time fraud in the financial sector? Like those banks that were slapped with a class action lawsuit after charging their customers excessive overdraft fees? Not only was that a case that came to be because bank customers fought back (and there was no arbitration clause to stop them) – it was also a case that got a lot of media attention, which in turn forced the banks to “straighten up and fly right.”

But that visibility is lost in arbitration, which usually also keeps things private. Instead, no one else hears what’s going on. And the power of the media is silenced.

Sure, we all know we are supposed to read the fine print. The thing is, who can understand what the fine print is saying? And if most consumer products and services today involve an arbitration clause – well, you might as well just give in and deal with it, right? After all, what can go wrong?

We’ll tell you. Here is what can – and does – go wrong with all of the everyday essentials we signed on the dotted line for:

• Phone: Infant chokes on loose part
• Credit card: Charges $4,000 in "fees"
• Investor portfolio: Looses money you saved for your retirement
• Employment: Illegally fires you because of discrimination
• Nursing home: Abuses patients

Remember how you signed on the dotted line? That’s right: The thing about forced arbitration is, no matter significant the injury, you can’t fight back in court. Fraud, abuse, discrimination – it doesn’t matter, you don’t get your day in court.

So how does one live without a phone, credit card or checking account – let alone that new home appliance? Well, we can’t.

Here’s what we can do: Learn what we can and start fighting back.

Across the country individual civilians, lawyers, judges – even government officials – are starting to say “No”. Forced arbitration is not okay. Courtrooms hold an important role in our country’s constitution and withholding that access to justice is a node to wealthy corporations that puts all of us at risk.

The lawyers at Baron and Budd stand with others in the battle against forced arbitration. We thank you for helping us in our fight by learning all you can about this important issue.

In coming blog posts, we will discuss more about the arbitration process and how forced arbitration came about in the first place. Stay tuned.