Source: U.W. Law School Consumer Law Clinic
What is a Mandatory Arbitration Clause?
If you signed a contract recently or clicked “I agree” on a company’s website, it is likely that you have legally agreed to be bound by a mandatory arbitration clause. Mandatory arbitration clauses state that any disputes you may have with that company must be settled through private arbitration rather than through the court system. This means that your dispute will not be heard by a judge or jury; instead, it will be heard by a private arbitrator whose decision is binding.
What is the difference between normal arbitration and mandatory arbitration?
In normal arbitration, parties to a dispute choose voluntarily and knowingly to enter into arbitration after a dispute arises in order to resolve it relatively quickly and inexpensively. In mandatory arbitration, however, you agree ahead of time to arbitrate any disputes that may arise in the future, thus giving up your right to choose how best to resolve the issue and your control over the process.
Why is Mandatory Arbitration a Problem for Consumers?
* You give up your right to a jury trial
* No ability to appeal – The arbitrator’s decision will be binding, leaving virtually no opportunity for review by a court of law.
* Lack of Impartiality – The terms of the arbitration, including selection of the arbitrator, will likely be dictated by the company, which may affect the impartiality of the process.
* Higher Costs – Arbitration will likely cost you more than regular court because it requires high upfront fees including hundreds of dollars in filing fees and thousands of dollars in the arbitrator’s daily or hourly fees.
* No Class Actions – You will likely give up your right to join a class action lawsuit, which can severely limit your ability to fight both large-scale scams and disputes with small amounts of damages.
* Inconvenience – You may have to travel to an inconvenient location for the arbitration instead of appearing at your local court house.
* Limited Investigation and Disclosure – Arbitration limits the amount of investigation that you can conduct in order to resolve a dispute, as well as the amount of evidence that each party is required to disclose to the other side.
* One-Way Requirements – Your arbitration clause may force you to arbitrate your dispute but allow the company to sue you in court if it so chooses.
* No Legal Precedent or Public Record – Arbitration decisions usually do not create legal precedent or a public record; thus limiting publicity of a business’ bad practices and keeping consumers or the government from policing similar conduct in the future.
* Limited Remedies and Consumer Protections – You will likely give up your right to seek certain remedies, like punitive damages and court orders requiring businesses to take or refrain from taking certain actions. In addition, you may be forced to resolve the dispute according to the laws of a different state that may not have the same consumer protections included in Wisconsin law.
What Contracts Contain Mandatory Arbitration Clauses?
You may have already agreed to dozens of these clauses without even knowing it. Some contracts that often include them are:
* Insurance
* Telephone and Cell Phone contracts
* Rented items
* Credit Cards
* Bank Loans
* Home Repairs
* Automobile Purchases or Leases
* Mortgages
* Payday Loans and Auto Title Loans
What Can You Do to Protect Your Rights?
* Shop around before buying; try to find a company without a mandatory arbitration clause in their contract.
* Read contracts thoroughly, including the fine print and any notices sent later.
* Attempt to negotiate the terms of your contract.
* Cross out the mandatory arbitration clause and initial the change before signing the contract.
* Keep a copy of all agreements that you sign in case you need to challenge any part of it in the future.
What is a Mandatory Arbitration Clause?
If you signed a contract recently or clicked “I agree” on a company’s website, it is likely that you have legally agreed to be bound by a mandatory arbitration clause. Mandatory arbitration clauses state that any disputes you may have with that company must be settled through private arbitration rather than through the court system. This means that your dispute will not be heard by a judge or jury; instead, it will be heard by a private arbitrator whose decision is binding.
What is the difference between normal arbitration and mandatory arbitration?
In normal arbitration, parties to a dispute choose voluntarily and knowingly to enter into arbitration after a dispute arises in order to resolve it relatively quickly and inexpensively. In mandatory arbitration, however, you agree ahead of time to arbitrate any disputes that may arise in the future, thus giving up your right to choose how best to resolve the issue and your control over the process.
Why is Mandatory Arbitration a Problem for Consumers?
* You give up your right to a jury trial
* No ability to appeal – The arbitrator’s decision will be binding, leaving virtually no opportunity for review by a court of law.
* Lack of Impartiality – The terms of the arbitration, including selection of the arbitrator, will likely be dictated by the company, which may affect the impartiality of the process.
* Higher Costs – Arbitration will likely cost you more than regular court because it requires high upfront fees including hundreds of dollars in filing fees and thousands of dollars in the arbitrator’s daily or hourly fees.
* No Class Actions – You will likely give up your right to join a class action lawsuit, which can severely limit your ability to fight both large-scale scams and disputes with small amounts of damages.
* Inconvenience – You may have to travel to an inconvenient location for the arbitration instead of appearing at your local court house.
* Limited Investigation and Disclosure – Arbitration limits the amount of investigation that you can conduct in order to resolve a dispute, as well as the amount of evidence that each party is required to disclose to the other side.
* One-Way Requirements – Your arbitration clause may force you to arbitrate your dispute but allow the company to sue you in court if it so chooses.
* No Legal Precedent or Public Record – Arbitration decisions usually do not create legal precedent or a public record; thus limiting publicity of a business’ bad practices and keeping consumers or the government from policing similar conduct in the future.
* Limited Remedies and Consumer Protections – You will likely give up your right to seek certain remedies, like punitive damages and court orders requiring businesses to take or refrain from taking certain actions. In addition, you may be forced to resolve the dispute according to the laws of a different state that may not have the same consumer protections included in Wisconsin law.
What Contracts Contain Mandatory Arbitration Clauses?
You may have already agreed to dozens of these clauses without even knowing it. Some contracts that often include them are:
* Insurance
* Telephone and Cell Phone contracts
* Rented items
* Credit Cards
* Bank Loans
* Home Repairs
* Automobile Purchases or Leases
* Mortgages
* Payday Loans and Auto Title Loans
What Can You Do to Protect Your Rights?
* Shop around before buying; try to find a company without a mandatory arbitration clause in their contract.
* Read contracts thoroughly, including the fine print and any notices sent later.
* Attempt to negotiate the terms of your contract.
* Cross out the mandatory arbitration clause and initial the change before signing the contract.
* Keep a copy of all agreements that you sign in case you need to challenge any part of it in the future.
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