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Congress eyes mandatory arbitration clauses in contracts
For years, consumer advocates have claimed these clauses are unfair. Now Congress is considering a blanket negation of predispute mandatory arbitration agreements. The Arbitration Fairness Act of 2007, recently introduced in the Senate and House of Representatives, proposes making the clauses unenforceable. Consumer lawyers also said that private arbitration companies are pressured to rule in favor of corporations, which often are repeat arbitration customers. ''If arbitrators rule against companies too often, they get blackballed,'' Public Justice's Bland said.
CONSUMER RIGHTS
Congress eyes mandatory arbitration clauses in contracts
Consumers could get more legal choices if Congress acts on legislation to void predispute mandatory arbitration agreements in car, credit card and other contracts.
Get a credit card, buy a car, or sign up for a cellphone plan, and chances are, if you're unhappy with your transaction, you won't be telling your story to a judge.
Many consumer contracts include mandatory arbitration clauses that force individuals to go through arbitration, instead of civil court, if a dispute arises. Some of these clauses also ban customers from joining class-action lawsuits.
For years, consumer advocates have claimed these clauses are unfair.
Now Congress is considering a blanket negation of predispute mandatory arbitration agreements. The Arbitration Fairness Act of 2007, recently introduced in the Senate and House of Representatives, proposes making the clauses unenforceable.
''This is, by far, the most comprehensive bill that has been introduced. There have been bills that ban arbitration in the employment section or the banking section,'' said Paul Bland, a staff attorney with Public Justice, a national nonprofit public-interest law firm in Washington, D.C.
South Florida consumer attorneys said the legislation highlights consumers' vulnerability when it comes to arbitration. Mandatory arbitration clauses tend to give companies, not the public, protection because the arbitration process can be costly and the time to make a case is limited.
Companies tend to win arbitrations, said Leo Bueno, a Coral Gables debt and consumer attorney.
While he said the concept of arbitration is good, ``the mandatory nature of it is offensive . . . because it takes out the right to sue.''
Many times consumers overlook arbitration clauses, but by purchasing goods or services governed by such clauses, they agree to settle any disputes through arbitration.
Consumer lawyers also said that private arbitration companies are pressured to rule in favor of corporations, which often are repeat arbitration customers. ''If arbitrators rule against companies too often, they get blackballed,'' Public Justice's Bland said.
Decisions by arbitrators -- lawyers or professionals who oversee and rule on cases -- are final and cannot be appealed.
But arbitration forums and some business executives said the agreements can be helpful -- if the process is fair.
Richard Naimark, a senior vice president of the American Arbitration Association, said his forum has safeguards to keep the arbitration process fair.
''In our process, we require really stringent disclosure from arbitrators,'' he said.
The number of arbitration cases filed with the forum has fallen in recent years as more businesses have found ways to settle disputes on their own, Naimark added.
One local auto dealership said mandatory arbitration clauses are mutually beneficial.
''It's good for the dealer and for the consumer because they can always work things out on a quicker and less costlier basis [than going to court],'' said Mark Naszradi, general manager for Williamson Cadillac Co. in South Miami. It includes consumer arbitration clauses in its contracts.
Naszradi, who said his dealership has not gone through an arbitration, added the agreements probably are not necessary but the dealership keeps them based on legal advice.
The Arbitration Fairness Act, introduced in the Senate and the House on July 12, would amend the Federal Arbitration Act passed in the 1920s.
Attorneys said this statute was intended to settle disputes between companies of similar size and power. But a series of Supreme Court decisions broadened the law to consumer cases.
Now, ''good luck finding a cellphone or a land line [contract] that doesn't have an arbitration clause,'' Bland said.
His advice: ``Consumers need to read the fine print of the contracts they sign. I know that sounds unrealistic . . . but consumers should try hard to not sign an arbitration clause if they can avoid it.''
http://www.miamiherald.com/103/story/181277.html |
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