House Subcommittee Heard Testimony on Unfair Binding Arbitration Clauses

  • Written by: AboutLawsuits

Lawmakers and consumers testified on Tuesday before a House subcommittee, calling for new, tough laws restricting the ability of companies to force customers into mandatory binding arbitration when disputes arise. The law could help protect consumer access to the courts in cases against nursing homes, banks, cable companies and other corporations.

Congress is currently considering two different pieces of legislation that would restrict forced arbitration clauses contained in many agreements consumers must sign to do business with companies in many industries critical to Americans’ day-to-day life.

Representative Henry C. Johnson of Georgia has introduced the Arbitration Fairness Act, which would prevent all pre-dispute arbitration clauses that could be considered “forced” due to economic and social needs of the individual, and Rep. Linda Sanchez of California has introduced the Fairness in Nursing Home Arbitration Act of 2009, which would nullify all such clauses contained in admission agreements that prevent residents or family members from filing a nursing home negligence lawsuit or other claim in open court.

A report released on Monday by Public Citizen found that 75% of eight major industries require customers to sign pre-dispute arbitration agreements, including banks, cable/internet providers, home builders, and car dealerships. These agreements require customers to sign away their ability to go to court if they have been wronged, and most companies refuse to give customers information about their arbitration requirements until they are ready to agree to sign a contract.

Defenders of the practice object to calling the agreements mandatory, since consumers are not forced to sign the contract, and other clauses in contracts that people may not be familiar with are not considered to be mandatory. Stephen J. Ware, a professor of law at the University of Kansas, testified against passage of the bills, saying that pre-dispute arbitration prevents load on the court system, and that there are pre-existing laws which allow courts to nullify arbitration agreements which are unfairly utilized.

Critics of the practice say that when such agreements become ubiquitous in key industries, especially ones where people have little choice but to participate, then such agreements become de facto mandatory requirements.

“Checking a parent or other relative into a nursing home or other long-term care facility is a perfect example of a time when one party really has no real power or choice in the matter,” Sanchez said in her testimony before the House Subcommittee on Commercial and Administrative Law. “For desperate families who are unable to provide adequate care at home, the need for an immediate placement for their loved ones makes the ‘take-it-or-leave-it’ choice no choice at all.”

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  1. Jordan Reply

    How can the prviatization of the justice system and the loss of our seventh amendment rights be just. With those 75% of arbitration clauses, the arbitration companies control our lives and can destroy them at their will. We are helpless, One citizen against the stable of high priced legal eagles of big business, we lose 98.4% of the time?. This is no fair playing field and there is no choice. If they file on you for any reason you are forced to pay and pay dearly.
    They are right you do not have to sign these forced agreements you can just not have: a car, a home, a credit card, cell phone,…not even Aflac insurance or be allowed to join a 24 hour fitness gym. People where I live are forced to sign these clauses or they can not have their elderly oved ones “taken care of”, in a nursing home. It is we will take your mother and your money but we accept no responsibility for her care, take it or leave it…. Or if you want this job to feed your family, no matter what we do to you, even rape … you are forced to sign off on the line or you can’t have a job. I could not even get a door delivered from Lowes’ with out giving up my seventh amendment rights, even though I paid for it . They refused to deliever it until I gave up my seventh amendment rights. I could have no back door otherwise. That is black mail pure and simple. This is what is wrong with our country. Arbitration has helped to cause so many foreclosures, it is a culpret in the housing debacle and the crash in the economy. No one will listen to the millions of us that have been finanicially destroyed. They pick us off one by one, they have the money and the power, they keep many of us under gag orders, also ripping our first amendment from us. We can not even speak out or warn others. It is a sickness, big business has been allowed to spread though our county robbing us of our dignity our trust in our government and any hope of a future. We are a land of angry Americans, and that is about the only right we have left.
    Please go to my web site for the truth

  2. Jordan Reply

    We have been fighting fraud and the loss of our uninhabitable new home since April of 2002 . We have now filed in the Texas Supreme court .

  3. Cindy Reply

    Many consumer groups support the Arbitration Fairness Act, either singly or in conjunction with larger groups who do, to consolidate efforts. Consumer groups covering all kinds of consumer issues have been pushing for this bill to pass. A group I volunteered with for several years, Homeowners Against Deficient Dwellings, (HADD) is one. Another is Home Owners for Better Building, Groups representing other consumer issues have also been involved, e.g. those dealing w/problems in franchises, nursing homes, credit cards, etc.

    Every home buyer should read Fair Arbitration Now’s report, Home Court Advantage, to learn how arbitration strips buyers of their rights in housing and home warranties. Fair Arbitration Now is a Public Citizen site.

    I believe on one of these Public Citizen sites there may still be a list of groups who’ve supported the Arbitration Fairness Act. Groups made up of individuals who understand the problem first hand. This work has been going on for years. Many amazing people have helped make this happen and I hope it passes this time. Many people’s consumer problems would not be so difficult if they could just retain their right to sue, which is huge leverage, and allows for public record of complaints, so that other consumers can find out. Arbitration buries complaints, something businesses love, as well as it’s industry bias of course.

  4. Marcia Reply

    Homeowners Against Deficient Dwellings and Homeowners for Better Building have been promoting the abolishment of MBA for years and at the very least warning consumers about it.
    Public Citizen has done an outstanding service to consumers in their report allowing people to know the pitfalls of, in my opnion, is such an unfair and unbalanced way to resolve some disputes.
    Many thanks to Congressman Henry Johnson and Senator Russ Feingold who were instrumental in getting this bill out. Thanks to Public Justice and so many others including Professor Richard Alderman of Houston.
    Consumers shoudl always have the option of going to court if they deem it necessary.

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