No matter how many financial contracts you enter into, there’s a good chance every one of them includes an arbitration clause. And, if it’s a loan or credit card or even a home mortgage loan, if you don’t agree to the terms, you move no further closer to closing the deal. Now, though, a consumer advocate group says these clauses are painting consumers into a corner and that corner offers very little protection to your rights.
No Legal Remedies
The National Association of Consumer Advocates released a survey that highlights the growing problem. If a consumer enters into these agreements and then discovers problems that require some type of third part mediation, there’s a good chance the odds are on the financial company’s side. Consumers are finding themselves with no legal remedies until after some type of arbitration has been completed – and often, not even then.
The survey included a pool of 350 consumer lawyers across 45 states. A whopping 84% of those attorneys said they had seen cases of “claim suppression”. They then provided details of some of their stories. It was also interesting to learn that most agreed the arbitration clauses prevented class action lawsuits – ones that the lawyers felt were legitimate. Nearly all – 90% – said they found themselves explaining to would-be clients that were it not for the arbitration clauses, they could have taken their case to court and likely won.
These company “outs” aren’t limited to just financial contracts either. These days, they’re found in most other legal agreements, including satellite TV services, gyms and even nursing home contracts. While the most objectionable contracts are those with a financial nature, the fact that they’re entering otherwise mundane contracts is troubling to some of those attorneys. Further, they’re expected to continue to expand to include legal documents across the board.
When the lawyers were asked what they felt was the biggest reason arbitration is not good for consumers, they all said the agreements kept the playing field uneven. Other reasons included an overall disadvantage for consumer, a lack of transparency and questionable choices in who ultimately serves in the role as arbitrator. Only 5% of those respondents say they pursued legal channels in an effort to bypass or discredit these agreements on behalf of their clients. It’s little wonder then that courtrooms aren’t where decisions are made, but instead, they’re being decided in an arbitrator’s office.
If there’s any reason a lawyer would decline to take on a case that’s not tied into one of the clauses, it’s that the claims are significantly small and provide, really, no financial incentive for the attorneys. In those instances where a class action suit has been filed, lawyers often can’t file another suit on behalf of a client who chose to avoid the class action path.
Still, all the lawyers polled agreed that consumers should never assume they have no other remedy when an arbitration clause in place. Even if a lawyer’s hands are tied in the short term, there’s a chance that it won’t be that way for long. At a minimum, if you’re having problems with your credit card company, cable provider or mortgage company, you should explore what options you do have so that you can make your decisions based on all the facts.
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