An agreement hidden in the fine print that waives your legal right to a trial when disputing claims against a company is being found in an ever-increasing number of consumer-business contracts including those with your bank and other financial institutions. But what many consumers don’t realize is that this agreement, called a mandatory arbitration clause, is not in their best interest. In fact, a study by the Pew Charitable Trusts’ Safe Checking in the Electronic Age Project found that 66 percent of checking account agreements at the nation’s largest banks had mandatory arbitration clauses. In addition, of the banks surveyed, 98 percent had clauses waiving a jury trial and 32 percent required customers to pay some or all legal losses, costs and expenses, reported Bankrate.com.
Mandatory arbitration clauses have grown popular over the last year, especially after the Supreme Court ruled in favor of arbitration clauses in the AT&T Mobility LCC v. Concepcion case, because it saves the company money by preventing costly class action lawsuits because in most cases the dollar amounts in dispute are too small to litigate individually. But consumers are left with the short end of the stick, as arbitration clauses make it easier for banks and other companies to improperly charge customers a few dollars at a time, without the threat that they will band together to take the company to court. “The success rate for consumers in mandatory arbitration is extremely low as the arbitrators are hired by the company so they are often biased in their favor,” says Been, a Los Angeles consumer protection lawyer. “Even blatant errors made in the legal process won’t overturn a decision reached in arbitration.”In fact, a 2007 study by Public Citizen found that California credit card customers lost 94 percent of arbitration cases handled by the National Arbitration Forum.Banks and financial institutions have seen the benefits of arbitration clauses and are now including them in their contracts more than ever, which is why you should always read the fine print of your contracts with any company.
If you, as a consumer, are forced to resolve a dispute with a company through arbitration, here are a few helpful tips:• Always read the fine print: Review your account’s terms and conditions, as well as the arbitration firm’s website before filing for arbitration. Know what you’re getting into: If you lose the case, you could be held responsible for the arbitration firm’s costs and the bank’s defense. Depending on what you are disputing, the costs associated if you lose may outweigh what you might have recovered or have already lost. Be able to live with the ruling: It is nearly impossible to overturn an arbitrators ruling, so be able to live with whatever is decided.