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Greg Webb
Greg Webb
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Arbitration Clauses Outlawed? A Quest to Restore Consumer Rights

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Legislation before Congress may restore consumers’ right to sue and not be forced into the arbitration process. The Los Angeles Times’ reporter, David Lazarus, noted in his column of October 18, 2011, that The Arbitration Fairness Act, if passed by both houses and signed into Law, would indeed supersede the U.S. Supreme Court’s ruling and re-establish the consumer’s right to sue and to join in class-action lawsuits.

Senate bill 987 was introduced in May 2011 by Senators Al Franken and Richard Blumenthal and by Congressman Hank Johnson in the House of Representatives. The bill aims to amend The Federal Arbitration Act. A companion bill solely affecting mobile phones (and mobile phone contracts), Senate bill 1652, was also introduced by Senators Franken and Blumenthal. Industry lobbyists from the financial services and mobile phone industries have positioned themselves against both bills saying, “If consumers don’t want an arbitration clause, they can go to a different company that doesn’t have one.”

“Arbitration clauses” are commonly found in many consumer and employee contracts which deny people the right to sue or join in class-action lawsuits “when they apply for credit cards, sign cellphone contracts or accept a job from an employer.” The end result is individuals bound by those contracts often give up their right to hold companies accountable for such things as manufacturing and selling unsafe products or other wrongdoing affecting the consumer or the employee. The American Association for Justice’s position appears to be that due to arbitration clauses, arbitration can be forced on consumers and employees in a “take-it or-leave-it” manner. Frequentlu, in arbitration, the company gets to pick the arbitrator and choose the rules of the arbitration… Sound fair to you? If the consumer is lucky, she can agree on an arbitrator from a panel or list provided – many times from a panel of arbitrators who have an industry bias. . . i.e., the deck is stacked against the consumer.

Legal strategists on Capitol Hill believe the bill may not make it out of the Republican-controlled House of Representatives; however, the Senate Judiciary Committee did hold hearings on the proposed legislation last week. The more public attention this issue receives, the more both legislative measures may take on momentum and pass. Most people do not – understandably – read the entirety of the fine print and legalese contained in their cell phone and/or credit card contracts, and that is where those nasty arbitration clauses are contained. There is very little, if anything, contained in an arbitration clause that benefits a consumer, or gives a consumer any leverage in resolving a dispute with a large corporation. If many of the cell phone and credit card users in the U.S. call their representatives and senators about this bill, perhaps the U.S. Congress would pass it, even though it is pro-consumer and does not afford protection to Big Business.