Binding arbitration can tie up consumers |
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Arbitration is supposed to provide a neutral third
party to resolve disputes. However, many consumer advocates charge
that because the major arbitration companies receive so much business
from large corporations, they are biased toward those corporations
and against consumers. The arbitration companies say that arbitrators
must disclose their backgrounds and disqualify themselves in the
event of a conflict of interest.
"Arbitrators are required to disclose conflicts
of interest and in many cases you can get more information about
an arbitrator's background to see if that person might have a bias
in favor of the other party," says Pamela Kentra, an associate
professor at the Chicago-Kent College of Law, who acts as an arbitrator
in the Better Business Bureau arbitration and mediation cases.
"If you have a choice of arbitrators, the No.
1 characteristic you want is neutrality, so if an arbitrator in your case had
a history of working for a company in the same area as the party you have the
dispute with, you might want to request another arbitrator." Who
could be facing binding arbitration?
Mandatory binding arbitration
clauses are common these days. They have become so widespread in many businesses
over the past 10 years that they are nearly impossible to avoid. For example,
if you want to purchase a cell phone contract, almost all cell phone providers
include a binding arbitration clause in their agreements. The only way to avoid
binding arbitration is to not get a cell phone.
You also find them when you buy a home or a car, receive
most kinds of medical services, get a computer or a software program,
sign up for insurance, open a bank account, or obtain a credit card.
In most cases, these are take-it-or-leave-it
agreements under which consumers must accept all the terms of the contract in
order to obtain a particular good or service. Arbitration
can be invoked by either you or the company. In most cases it will be the company.
Paul Bland, an attorney with Public Justice, a nonprofit devoted
to consumers' rights issues, says, "The vast majority of arbitration claims
involving consumers are collections actions brought by creditors against consumers.
For instance, the National Arbitration Forum is doing hundreds of thousands of
arbitration cases where a creditor is invoking arbitration in order to get a customer
to pay overdue balances." In many of these cases, Bland
says, consumers either don't open correspondence from creditors and/or arbitrators
about claims or ignore them altogether, resulting in an automatic judgment against
those consumers. "It used to be that if you fell behind
on your credit card bill, the credit card company would call you to find out what's
going on and work out a payment schedule," he says. "Now, many credit
card companies and other creditors are taking you right into arbitration. The
arbitration awards in many cases will not only include your overdue balance, but
also interest, penalties, arbitration and legal fees. | 
