Many consumer contracts — checking account contracts, cellphone contracts, even nursing home or hospital contracts — now contain arbitration clauses. Despite being buried in the fine print, these contracts often require consumers to give up their right to a jury trial in favor or arbitration. Many also expressly forbid “class actions” within the arbitration context. When consumers have disputes with one of these business, they are prevented from filing a claim in court and must, instead, submit to arbitration, often in a far-away forum and usually at a cost of several thousand dollars. What happens when a consumer is cheated by a corporation for $100? Arbitration clauses effectively foreclose any legal right of action. Unfortunately, these arbitration clauses have been upheld by the United States Supreme Court and, unless Congress takes some action (unlikely) to fix the problem, consumers will remain at the mercy of large companies.
The Wall Street Journal, not surprisingly, has been a long-time champion of arbitration clauses, claiming that arbitration is cheaper, faster, and more informal than court proceedings. While that may be the case when two large companies are fighting over a large contract dispute, it is certainly not the case when a lone consumer is pitted against a large company. Without the ability to consolidate claims in a “class action”, the consumer is prevented from bringing any case. Recently, the Wall Street Journal published an article decrying the unfair treatment that many soldiers and other service members were receiving from banks. Despite its coverage of the situation, the paper noted in its article that soldiers had been prevented from bringing legal action because they were barred by arbitration clauses. The irony was apparently lost on the Wall Street Journal, who failed to recognize that the outcome they were bemoaning was exactly what they had championed for years.
Public Justice has a good, concise piece up about the issue here.