Binding arbitration can tie up consumers
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"This can ratchet the arbitration award up by thousands of dollars," he says. "And since arbitration awards are extremely difficult to overturn, the consumer will be forced to pay that amount."

When will you be faced with binding arbitration?
If you have a complaint, it's best to try to resolve the problem directly, via phone calls and letters. Make sure to keep a log of all phone calls, e-mails and correspondence between you and the company that documents your efforts to resolve the issue, as these will come in handy later.

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Before initiating arbitration, speak to an attorney who is familiar with arbitration clauses to see whether the clause is legally valid and if there are any grounds to set it aside.

"Wording of arbitration clauses varies and in some cases, if the clause is very one-sided in terms of favoring one party over the other, you might be able to get it thrown out in court," says Geoffrey Gold, an attorney with Rutter, Hobbs & Davidoff in Los Angeles.

State laws differ on what types of arbitration clauses are allowed in standard contracts and agreements. State courts and judges also vary widely in their interpretation and enforcement of arbitration clauses. In some states, such as California, courts are more inclined to set aside arbitration clauses. In other states, such as Texas, they are rarely voided even if the contract containing the clause was fraudulent.

How does binding arbitration work?
There are four major arbitration providers:

• The American Arbitration Association.
• National Arbitration Forum.
• JAMS.
• Better Business Bureau.

The fees and rules will vary depending on which arbitration provider is used, so carefully check the Web site of whatever provider is named in the contract that you signed. The fees just to file a case start at $125 and go up from there. If the arbitration provider is not specified in the contract, ask the company which it will be. The company gets to decide.

You can file cases subject to arbitration online:

• The American Arbitration Association's case-filing portal contains prefiling information and forms to file a case by mail, e-mail or fax. • The National Arbitration Forum has an initial claim filing form, including a downloadable Microsoft Word document of the claim form. • JAMS also offers a case filing form and rules. For binding arbitration, you must download a Microsoft Word or PDF file and mail the application in. • The Better Business Bureau Binding Arbitration site also lists its rules and procedures.

Generally, fees are due when you file a case. Depending on which company hears your case, the amount of money in dispute and the set of rules that your claim will be arbitrated under, fees can run from several hundred dollars to several thousand dollars.