Thursday, July 23, 2009

Arbitration firms may be a fraud

Imagine going to a neutral third party to have a dispute resolved and then learning that the decision maker was a partner of your adversary. That is basically what the Minnesota attorney general has accused the National Arbitration Forum of doing.

This past Sunday the NAF made an agreement with the attorney general and will no longer be arbitrating between consumers and credit-card companies. The American Arbitration Association said Tuesday it will stop participating in consumer-debt-collection disputes until new guidelines are established. In addition to credit cards, some contracts involving autos, cell phones and health care require consumers to resolve disputes through binding arbitration rather than going to court.

What most consumers fail to recognize is that binding arbitration relinquishes the Seventh Amendment right to a trial by jury. The great danger is that you have a dispute now being decided by someone who is going to side with your adversary. The mega corporations will only use these arbitrators as long as they are winning and the arbitration firms know it. Essentially, when signing a contract that includes a binding arbitration clause you are saying "I won't fight, you get what you want". What the companies want is an enforceable judgment.

Dan Edelman, an attorney who filed a lawsuit last week seeking to invalidate NAF arbitration awards, said, “People don’t understand that arbitration awards can be turned into judgments and result in asset seizures.” Mark Lavery, a Des Plaines lawyer who represent borrowers, said "The National Arbitration Forum was really becoming a collections litigation strategy," The NAF denied Swanson’s accusations but said it decided to voluntarily stop administering consumer arbitration disputes because of mounting legal costs.

You have likely signed a contract which binds you to arbitration without knowing it. I do not and will not sign any contract that binds me to arbitration. If a company is going to try to screw me over then they will have to present their position to a jury it is that plain and simple. When presented with a contract ALWAYS read the fine print. If there is something you do not understand then ask the representative presenting the contract to explain it to you. If they are unable then ask for them to call their legal counsel.

There is a canon of law that provides that contracts must be made in simple, clear, understandable and easily readable terms. Thus, if you can't understand the 'fine print' you may have a voidable contract if you take the matter to a court. An arbitrator does not have the power to void a contract.

Do not let yourself be intimidated into signing any contract. Do not be pressured by expediency or people waiting in line behind you. They may actually appreciate learning that they too are about to get screwed in a contract also. Do not let a representative tell you that these are the 'standard terms' or 'what everybody signs'. Keep in mind I don't so not everybody does. Recall what your mother likely told you a time or two, "If every body else jumped off a bridge would you too?"

There is always someone else who will provide the service without the mandatory arbitration clause. As more people refuse to sign these contracts and take their service elsewhere, more companies are dropping these clauses or offering an opt-out. Protect your rights and know the law.

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