The Dangers of Binding Mandatory Arbitration

By agreeing to any contract containing a binding mandatory arbitration clause means that you are giving away your constitutional right to settle a dispute, no matter how serious, and giving the power to the contracted company. BMA's are usually part of most credit card disclosures which gives you no recourse for legal proceedings when problem arise.

Why would any sane individual do something so disempowering?

Mainly because the consumer thinks they have no choice. The credit card companies have built up their image so big and powerful that they write the rules, regardless of local. state or federal laws.

When a corporation includes a BMA requirement in its contracts, it means your dispute must be decided by a private legal system. Because BMA clauses are "binding," you must abide by the decision and have no right to appeal.

The judges, called arbitrators, do not have to follow the law or even justify their decisions which, unlike court verdicts, are not open to public inspection. The absence of rules is especially disturbing . The arbitration system allows conflicts that would not be permitted by the court system. The American Arbitration Association invests in major corporations whose legal disputes the firm's arbitrators hear; companies are allowed to buy "memberships" in the association, and their executives sit on its board of directors. Arbitration firms often court clients by touting their small awards and perfunctory procedures. Also, arbitrators face an inherent conflict to "please" companies to keep them coming back for repeat business.

Arbitrators can make $10,000 or more a day, in comparison with a Superior Court judge's $133,000-a-year salary. This leads to the temptation for sitting judges to impress arbitration firms with their ability to get quick settlements of complex cases. Judges may also feel pressure to uphold disputed arbitration decisions.

It takes away your right to appeal a bad decision and normally costs much more than using the courts. By not being an appealable decision they are not subject to judicial review. Also, many people with serious complaints, such as racial discrimination, sexual harassment or denial of medical care, have no choice but to have their case heard by a arbitration firm selected by the company that is the target of the grievance.

A BMA prevents you from being part of most class action lawsuits and always favor business rather than you. That's why companies use them. Arguably, they were initially included in contracts in defense of frivolous lawsuits, however they strip the consumer of any rights they have.

What began as a noble concept -- using arbitration instead of the courts to settle many disputes -- has developed into a grossly unfair commercial justice system.

Without knowing it, you may have already signed dozens of these clauses.

The BMA is a very common clause in many contracts such as: health insurance contracts, telephone contracts, car contracts, rental clauses, employment contracts, bank loans, nursing homes, summer camps, house repairs - AND ESPECIALLY CREDIT CARDS!

There has been case after case in which workers and consumers with legitimate grievances had no chance of getting a fair remedy in arbitration. It spelled out how "arbitration agreements" in small type often force Californians to give away significant legal rights as a condition of getting a job, obtaining medical treatment or even buying something as simple as long- distance phone service.

While we generally like the idea of reducing costly lawsuits, the shift to arbitration at this magnitude, and with its lack of basic rules, has come at a severe price to the concepts of justice and fair play.

In plain terms, the arbitration system stacks the deck in favor of corporations.

And they are determined to keep it that way.

Even modest attempts to reform the arbitration system encounter stiff opposition in Washington. The reason is no mystery. The big corporations, who have the coziest relationships with arbitrators, also have the most clout in the capitals. They invest heavily in campaign contributions and lobbying fees, and defeat of any sort of worker or consumer rights measure is a perennial priority.

Binding Mandatory Arbitration Clauses aren't designed to help you or save you money, they are designed for the company best interests.

BMA clauses are so bad that few consumers try to use them to solve a dispute. Instead, the consumer walks away from the dispute, even when the consumer has been terribly hurt. One study shows that in 50,000 arbitrations, consumers brought only fifty of those arbitrations. Companies brought the rest.

Hundreds of types of businesses are sneaking these clauses into their paperwork. If you care about your rights, you must understand this issue, and help us fight binding mandatory arbitration.