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Forced arbitration: Clause for concern

 More companies are using forced arbitration clauses in their contracts and that costs consumers. (Consumer Reports)
More companies are using forced arbitration clauses in their contracts and that costs consumers. (Consumer Reports) (KOTA)
Published: Mar. 4, 2020 at 11:23 AM MST
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In 2015 Volkswagen publicly admitted to secretly programming some if its diesel engines to cheat emissions tests.

Hundreds of thousands of owners banded together in a group lawsuit, which helped cast a very bright spotlight on this very deceptive behavior.

Experts at Consumer Reports are concerned that this type of accountability may happen less often because many companies are making an easy-to-miss but important change in their sales agreements, called a forced arbitration clause.

Basically, it means you’re giving up your right to take a dispute to court. This is a constitutional right, and you’re giving it up even before there’s a dispute.

Arbitration clauses are typically buried in the fine print of product manuals and websites. Most people don’t even realize they’re agreeing to them.

The implications for consumers are considerable. Many of the rules in place to ensure fairness in the court system are missing from arbitration. So, for example, arbitrators don’t technically have to follow the letter of the law. And if you’re not happy with the result, you generally don’t have a right to appeal.

Unlike a court of law, which is open and public, arbitration is private, with no public record.

Plus, unlike a court of law, arbitration doesn’t allow people to join together to fight back, which happened in the Volkswagen class-action suit.

The concern is that companies are using arbitration to preemptively crush consumer objections to practices that may be unsafe or predatory or even illegal.

Consumer Reports says the best way to protect yourself is to buy from companies that don’t make you forfeit your legal rights in advance. The only way to know for sure is to read the fine print ahead of time.

But with forced arbitration clauses spreading throughout the marketplace, you may find you don't have a choice. There may be hope coming from Capitol Hill. In September the U.S. House of Representatives passed a measure that would ban forced arbitration. It's now in the Senate.

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