Why binding arbitration is bad

Grow Your Legal Practice. Meet the Editors. Arbitration Pros and Cons. Learn about the advantages and disadvantages of arbitration. Pros of Arbitration Promoted as a way to resolve disputes efficiently, proponents of arbitration commonly point to a number of advantages it offers over litigation, court hearings, and trials. Cons of Arbitration Being aware of the possible drawbacks of arbitration will help you make an informed decision about whether to enter or remain in a consumer transaction that mandates it -- or whether to choose it as a resolution technique if a dispute arises.

Smart Steps for Consumers to Take Before Entering Arbitration Given the possible perils and unevenness for those who unwittingly enter arbitration contracts, the wise consumer can take a number of steps to become better informed and, possibly, ward off a bad experience. Talk to a Lawyer Need a lawyer? Start here. Practice Area Please select Zip Code. How it Works Briefly tell us about your case Provide your contact information Choose attorneys to contact you.

Lawsuits and Court. Filing a Lawsuit. Representing Yourself. Working With a Lawyer. How to Find a Lawyer. Cost of a Lawyer. Everybody's Guide to Small Claims Court. Represent Yourself in Court. Unpopular as they are, class-action suits are a legitimate avenue for pursuing civil justice and should not be limited in this way. Blocking their use deprives the customer of an important path to redress, and this is no more appropriate when done by a commercial enterprise than by a government body. The right to litigate in court is something worth defending.

Important matters of principle are at stake, and they are the very principles espoused by advocates of free markets: freedom of choice, level playing fields, no one-size-fits-all regulation.

But mandatory arbitration runs counter to all these principles: it is a one-size-fits-all solution that reduces consumer freedom of choice and assumes that the firms know what is best for their customers better than the customers themselves.

Moreover, the financial industry will now have difficulty fighting future rules by invoking the principles they now find convenient to ignore.

A less diplomatic writer would put it this way: it smacks of hypocrisy. This abandonment of principle is compounded by Congress rushing the resolution through without the same level of consideration and analysis that is invariably demanded of new regulations the CFPB spent five years studying the issue before issuing its rule. The weapon of choice was the Congressional Review Act CRA , a little gem of partisanship that allows Congress to overturn new regulations by federal agencies and bar their reinstatement, but only within a short window of time.

They may even be called something different, such as "Alternative Dispute Resolution. There is nothing wrong with voluntary arbitration as it preserves your legal rights. The problem comes with mandatory or forced arbitration where you are giving away your legal rights if the arbitration process doesn't work in your favor. Companies have the advantage in arbitration and want you to go through the arbitration process.

Arbitration providers market entirely to businesses and their arbitrators often consist primarily of corporate executives and their lawyers. So, arbitration is tilted heavily in the favor of the company because the arbitrator is chosen by and paid for by the company. That arbitrator has a financial incentive to rule in the favor of the company in order to be chosen in the future by the company for other arbitration cases.

But that doesn't necessarily mean that the arbitration will not find for the consumer. And since arbitration is private, everything that happens behind those closed doors is supposed to remain secret, meaning there is no public review of the process and no appeal in the case of binding arbitration. Arbitration clauses are often written in such a way so that consumers are discouraged to use it. To add more insult to injury, any fees for which you are responsible or may be responsible often have to be deposited to an account in advance of the hearing.

So, a company is banking that you won't want to travel across country, put up a large deposit, split hundreds of dollars in fees, and risk having to pay additional fees in the event of a loss for a small claim. They're also banking that you just won't have the money to bring such an action anyway.

As an example of arbitration fees, Lowes Home Improvement has an arbitration clause when you use its website, any of its apps, its customer programs, and any other site in which its terms and conditions may appear.

That alone might not be worth taking your issue to arbitration. While companies love pushing you into mandatory arbitration, they don't like being pushed into mandatory arbitration themselves. In fact, most companies refuse to deal with other companies where mandatory arbitration clauses are in effect. They want to control the process themselves, not be controlled.

Companies often tout the lowered cost of arbitration when compared to traditional legal avenues. But that's not necessarily true for you.

It is true for the company, but if you have to shell out fees just to attend the hearing, you're already at a loss. Companies don't want to go yo court because it puts them on a level playing field. Whether suing on behalf of our members to ensure the honest functioning of government, or representing individual consumers seeking redress in court, our litigation draws on our expertise in administrative law, constitutional law, and government transparency.

Most people who are subject to mandatory, pre-dispute arbitration clauses in their contracts for employment, credit, sales or services do not know that they have waived their right to access the courts. By signing a car lease, using a credit card, accepting a new job, buying a computer, or purchasing private health insurance or HMO coverage, they may have waived their rights to hold companies accountable for wrongdoing under local, state, and federal statutory and common laws.

Consumers and employees often have no choice but to waive their rights because arbitration clauses are presented in take-it-or-leave-it contracts. The following are problems faced by consumers and employees who are forced into arbitration by contracts written solely by the corporation:. Since businesses that impose arbitration are likely to keep an archive of decisions, they enjoy the advantage of being able to choose those arbitrators that have ruled for them.

And with no public record, the companies can present to the arbitrator favorable cases from their own files while not disclosing cases favoring the employee or consumer. Corporations should not be allowed to avoid those policies by forcing individuals into arbitrations where their rights are not protected.

Protecting Democracy [1] American democracy is in jeopardy, from the disastrous Citizens United ruling that flooded our politics with corporate cash to the immoral assault on voting rights.