Binding arbitration can tie up consumers
By Amy Buttell Crane • Bankrate.com

Unhappy customers used to threaten, "I'll see you in court!"

That won't work any more. These days, consumers are increasingly forced to resolve disputes via mandatory binding arbitration. Unfortunately, while many people now are covered by binding arbitration agreements, most don't know what they are, how they work, when they come into play or who will be deciding the fate of their complaints.

Businesses love binding arbitration. For them it's a faster and cheaper way to settle disputes and a great way to generate debt collections.

Consumer advocates aren't quite as happy about it.

"I think binding arbitration is bad for a number of reasons, chiefly because it guts the U.S. Constitution, which is the one document that makes our country unique," says David Rumley, an attorney with Wigington Rumley in Corpus Christi, Texas, who has worked on binding arbitration cases.

"Here, an ordinary person can take a big corporation to court and get a hearing in front of a jury of his or her peers. Binding arbitration, by contrast, is 100 percent in favor of big business and against the consumer."

Binding arbitration Since it's very likely that you have signed up for at least one product or service that makes you subject to binding arbitration, you had better learn something about it.

What, who, when, how? 1. What is binding arbitration? 2. Who could be facing binding arbitration? 3. When will you be faced with binding arbitration? 4. How does binding arbitration work?

What is binding arbitration?
Mandatory binding arbitration is an agreement to have a third party weigh the merits of each side of a dispute and render a decision. That decision is final, and in most cases it can't be appealed, either to another arbitrator or to a court of law.

You give up your right to sue when you sign a contract containing a binding arbitration clause and you expose yourself to fees that can run into the thousands of dollars plus the cost of a lawyer. You lose many of the protections you would have in a court of law.

The hearing could be in person or via a conference call. If the hearing is in person, it may be held in another state. If so, you'll have to pay your own expenses for travel and lodging while attending the hearing. If you hire a lawyer, you'll be paying his or her expenses, too.

While consumers can represent themselves in arbitration, just as they can represent themselves in court, it's probably a bad idea, as binding arbitration is usually a one-shot deal. If you make a procedural mistake or miss a deadline, the arbitrator may rule in the other party's favor and you will find it very difficult to appeal that decision.