Hidden Clauses Can Be Found In Credit Cards, Big-Item Contracts
If you have any credit cards or have made any large purchases, you've probably signed dozens of hidden clauses often buried in a contract's fine print that could cost you a bundle. WBAL TV 11 News I-Team reporter Lisa Robinson took a look at hidden clauses and how you can protect yourself.

Hidden Clauses Leave Consumers Without Court Time

Hidden Clauses Can Be Found In Credit Cards, Big-Item Contracts
July 23, 2007

BALTIMORE -- If you have any credit cards or have made any large purchases, you've probably signed dozens of hidden clauses often buried in a contract's fine print that could cost you a bundle.

WBAL TV 11 News I-Team reporter Lisa Robinson took a look at hidden clauses and how you can protect yourself.

Earl Ross said he bought his wife a hot tub last July to help her with some back pain, but he ended up replacing the first one he bought.

"It started to leak about 800 gallons of water per day -- leaking into the foundation of the house," he said.

Ross said the contractor improperly installed the hot tub and he couldn't get him to fix the problem. Currently, he's lost more than $15,000 -- the cost of the first hot tub -- plus an additional $7,000 to repair damage caused to the foundation of his home.

Ross told Robinson he wanted to take the company to court but couldn't because of an arbitration clause in the hot tub contract. Ross unknowingly agreed that any problems "shall be determined by arbitration" and "the award ... shall be final and binding."

"Basically, I signed it. I paid all the money up front. I didn't have any idea that I was pretty much waiving my legal rights to court proceedings," he said.

Binding arbitration clauses are often in the fine print of credit card agreements and in the sales contracts for big ticket items, such as computers and appliances. You can also find them in contracts for telephone service, gym memberships and employment, Robinson reported.

"It's really unfair. It seems like it's really in favor of the contractor. The consumers don't really win on this," Ross said.

"What it means in bottom-line plain English is that the consumer, in the event of a dispute, will get no jury, no judge and no right of appeal," said Peter Holland, a consumer attorney.

Mandatory binding arbitration means your dispute has to go through specific channels outside the courts, and the decision is final, Robinson said.

"Consumers are signing these arbitration clauses in contracts and have no idea (the clauses are) in the fine print on one of 20 pages they sign," Holland said.

Paul Bland, an attorney with Public Justice, has testified before Congress about the process. He said he believes the arbitration system is rigged in favor of the companies who write the contracts.

"The companies are writing the clauses. And since they're picking who the arbitrators are, the arbitrators have this huge incentive that if they want the business, (they should) rig this in favor of the corporations," Bland said.

Robinson asked the American Arbitration Association, one of the larger arbitration firms, to comment on the issue of fairness. A spokesperson told Robinson that there is protocol "designed to set fairness standards and achieve a level playing field."

The spokesperson said "arbitrators go through strict disclosure reviews" as part of that protocol, which is "meant to make for reasonable access to justice."

Rep. Hank Johnson, D-Georgia, said he's drafting legislation to protect consumers.

"I want to restore people's ability to take their matters into a court of law and have a jury of their peers decide what the resolution should be," Johnson said.

Robinson reported that Ross has to play by arbitration rules in order to recover his money.

She said in his case, it isn't cheap -- he paid an administrative fee of more than $900 for the arbitrator to do his part -- totaling more than $1,800. A day in court would have cost him under $100.

Consumer lawyers suggest that consumers should cross out any binding arbitration clause they find in contracts and initial it. If the company doesn't like it, consumers should be prepared to take their business elsewhere.

Ross said he felt he needed an attorney to help with his case, which cost him another $2,500.

The cost of arbitration does vary depending on the amount of the claim and the type of case, Robinson reported.

For more information on consumer rights, go to www.givemebackmyrights.com.