You agreed to this (whether you know it or not)….Mandatory Arbitration Agreements

In trying to find some empathy for some of my friends who are so shocked at the recent election results, I can still conjure up my shock when I first read the US Supreme Court decision in AT&T v. Concepcion  in April, 2011, which essentially wiped out our constitutional rights to have any legal dispute heard by a jury of our peers. (Editor’s Note: In the Concepcion case, the U.S. Supreme Court gave its blessing to any company that wants to hide language in any consumer contract that says “I, the consumer, agree that the only way to have my dispute with the company heard is by a private arbitration company and not in a Court of law”)

Sure, Concepcion was about stopping class actions filed by large groups of consumers who all have small monetary claims (the suit was about charging $30 for a free phone), but when the highest court in our nation upheld a forced mandatory arbitration clause in a cell phone contract it sent a message to every business in America that they too could easily eliminate the risk of being sued. A year later, the National Association of Consumer Advocates released a study  revealing that, no surprise, arbitration agreements are everywhere,  “from health club contracts to cable television services to nursing home contracts;” and they are, effectively, suppressing consumer claims and denying us our day in court. Let’s compare this study, with the recent news releases from stopfraud.gov‘ (which is a governmental task force made up of 20 federal agencies, 94 US Attorneys Offices and state and local partners to investigate and prosecute significant financial crimes).  StopFraud.gov issues weekly reports of fraudulent schemes that have affected millions, and lawsuits and settlements involving billions of dollars, covering criminals and big corporations alike.  One example is the lawsuit the DOJ just filed last month in NY against Bank of America seeking over a $1 billion for mortgage fraud.

In an age when half the country wants ‘less government’, one avenue to reduce government spending might be to look for ways to allow more (not fewer) private lawsuits to attack fraudulent practices against consumers. So what can we do? Since the chances of getting Congress to pass The Arbitration Fairness Act, S. 987 and H.R. 1873, is next to nil, all we can do is take the matter into our own hands, and do one of the following:

1) Refuse to do business with any company that forces you to waive your rights (next to impossible as nearly every nationwide company does this); 

2) Read the contract and physically cross out the mandatory arbitration provision before you sign (there may not be a quicker way to have the salesman say ‘I’m sorry, we can’t do business with you’);

3) Timely exercise your right to opt out of a mandatory arbitration program (easy!- if you read the fine print and act quickly!)

Option #3 seems to be the new trend now - offering consumers the right to decide (for a very limited time frame) that they don’t want to be forced into mandatory arbitration (this is called an ‘opt out’ clause).  By offering this ‘opt out’ clause, companies seem to be in a stronger position, when they need to prove in Court that their mandatory arbitration provision was not really ‘forced’ or ‘mandatory.’ The catch is the small window of time given to consumers to exercise that right. In the Time Warner contract,  for example, you must exercise your ‘opt out’ rights within 30 days of the FIRST time you become a Time Warner customer. The ‘opt out’ ship for Time Warner contracts sailed a long time ago for me, but it’s not too late to opt out of a mandatory arbitration program recently announced by PayPal. Nearly everybody uses paypal for online shopping, so anybody who has ever used it should jump on this chance to protect themselves. One of my favorite consumer blogs, Consumerist has made it super easy to ‘opt out’ of the PayPal mandatory arbitration agreement by giving us a downloadable form.  All you need to do is download it, sign it, and get it in the mail and postmarked no later than Dec. 1, to:

Litigation Dept.
2211 North First St.
San Jose, CA      95131

It’s always a good idea to keep a copy of any letter you send, and to be extra careful, you might want to send the letter by ‘certified mail return receipt requested’ – so you have proof that they received it. New customers will have 30 days from the date you first accept the user agreement to send the opt out letter, so if you start using it this holiday season, add it to your list of New Year’s resolutions to follow up with that opt-out letter . Ebay recently adopted a mandatory arbitration program and also gave customers a 30 day window to opt out, but that deadline passed earlier this week.  Don’t let this deadline pass, ACT NOW!!

Posted by: Nadine Ballard