ATTORNEY NEWSLETTER
The Effect of Arbitration Clauses on consumer Protection
The rise of arbitration clauses over the last few decades has meant two different things to two different parties: for corporate attorneys, arbitration clauses allow them to circumvent the long, arduous, and costly process of a civil trial. By consolidating the process into a private, streamlined event, arbitration clauses allow them to deal with disputes far more efficiently. For plaintiffs however, mandatory arbitration can feel like losing the constitutional right to a jury trial. While efficiency can benefit both parties in a case, arbitration offers a number of unfair advantages to the corporations that have fought to bring it to prominence.
Arbitration clauses were once used far more sparingly than they are today, and existed mostly to mediate disputes between merchant and businesses. However, they have proliferated wildly, and it is now likely that most consumers in the U.S. have agreed to at least one, whether it be for a Bank, insurance company, music service, or essentially any business you enter into a contract with. When agreeing to one, a consumer is generally giving up their right to sue the company or join in a class action case, and must instead settle any disputes through “binding arbitration,” essentially agreeing to let a private judge chosen by the company decide the case.
This obviously seems problematic to the consumer, and it often is. While arbitrators are expected to remain neutral in resolving disputes, if they consistently rule against a company, they will likely take their business elsewhere, giving them an incentive to put their thumb on the scales. Secondly, arbitration essentially kills the possibility of class actions, which are designed to help resolve relatively small damages that happen to large numbers of people. Instead, each person who would be in the class, sometimes thousands, hundreds of thousands, or millions of consumers, would have to individually pursue their claim through arbitration, hire a California consumer protection attorney, and fight over a few hundred dollars. Since few people have the time, money, or energy to do this, arbitration clauses essentially mean that large corporations can’t be held accountable for this type of damage.
While arbitration is alive and well at the federal level, various states have taken a stand against mandatory arbitration. Despite various California laws against arbitration being taken off the table, mortgage transactions in California remain immune to mandatory arbitration clauses. California courts and the legislature remain opposed to mandatory arbitration clauses, and there are some protections available in the state.
The Evans Law Firm handles cases dealing with bank, insurance, and investment fraud, as well as consumer and senior protections. Our California consumer protection attorneys can guide cases through a civil trial or toward an equitable settlement. We can be reached at (415) 441-8669, or by email at info@evanslaw.com.
