Consumer Fraud of the Century: Mandatory Arbitration

Mandatory arbitration is a consumer fraud of epic proportions. Unscrupulous businesses have discovered this powerful secret to legally defraud consumers. Car dealers, credit repair organizations, medical providers, and credit card companies are perhaps the worst abusers of mandatory arbitration of consumer claims but many other companies are jumping on board.

The worst part of the mandatory arbitration consumer fraud is that the courts, including our beloved Supreme Court, have overwhelmingly supported the fraud. Thousands of court decisions have held that mandatory arbitration is cheaper, faster, and easier and therefore better for consumers than litigation. Those decisions are lies. Arbitration is demonstrably more expensive for consumers, less favorable to consumers, and far more likely to crush a consumer’s claims than to redress them. Indeed, why else would companies who defraud consumers use arbitration agreements if not to continue the fraud?

Cost of Arbitration

One of the main concerns about mandatory arbitration is the cost. For example, filing a federal lawsuit costs less than $500.00 but the cost just to file an arbitration claim can run upwards of $3000.00 or more. Because arbitrators are paid hourly, the costs to arbitrate can quickly exceed five figures even in small value consumer cases.

No Right to Trial by Jury

Another problem with mandatory arbitration is that it deprives a consumer of his constitutional right to a trial by jury. Since most cases settle prior to trial this is not a problem for many consumers but for those who do end up litigating their cases, having one or more arbitrators hearing their claims instead of a jury can be a serious problem. Arbitrators are mostly former attorneys and judges with pronounced biases toward business interests and look on consumer claims as nuisances and barriers to conducting business.

Arbitrators Stake in Outcomes

More importantly however, is that businesses are the driving force behind arbitration. Indeed, arbitrators are typically selected and paid by the businesses that ripped you off. That places the arbitrators in the untenable position of potentially preventing them from hearing future cases they rule in the consumer’s favor. The bias in these situations is obvious. The simple fact of life is that it is better to litigate consumer claims to an unbiased jury of other consumers rather than to an arbitrator whose living depends on the company that abused you hiring him in the future.

Lack of a Public Record

Another reason mandatory arbitration is a consumer fraud is that generally arbitration is privately conducted. There is no public record of the proceedings or outcome making it very difficult to determine the extent of abuse a company is perpetrating on consumers. In court, there is typically a public record of the claims, defenses, and even discovery documents making it relatively easy to assess whether or not a company is consumer friendly.

Discovery Limitations in Arbitration

Arbitration also strictly limits the consumer’s ability to obtain documentation and other information to support his claims. In court on the other hand, businesses are required to disclose information to assist in assessing the truth and strength of the consumers’ claims. This discovery process is required in courts and generally runs in favor of the consumer and makes it far harder for businesses to hide information. In arbitration, the discovery process is easily limited or even thwarted altogether by unscrupulous companies seeking to conceal their wrongdoing.

Conclusion

Arbitration has grown into a powerful alternative to litigating cases in the court system; for businesses. Consumers, on the other hand, quickly find that mandatory arbitration is expensive, complicated, and decidedly consumer-unfriendly. Losing your right to a jury, having your claims heard by an arbitrator who is paid by the opposing side, and limiting discovery of important documents are just a few reasons why consumers should avoid the mandatory arbitration fraud like a plague. The simple fact is that businesses have been forcing the mandatory arbitration fraud on consumers for decades because it favors businesses. Why else would so many businesses force arbitration on consumers, if not to gain an advantage?



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