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Financial institutions are engaging in an assault on the rights of consumers to secure the protections afforded them under law through the use of
mandatory, binding arbitration clauses unilaterally inserted in adhesionary contracts with consumers, without negotiation or
consent. All across the country,  banks, financial institutions and even automobile dealers are including standardized terms in
contracts of adhesion which provide that consumers agree to resolve any disputes by arbitration and waive their rights
to trial by judge or jury. The purpose and intent of such clauses is to insulate unlawful, unfair, or deceptive
practices from any meaningful review by making it difficult to obtain discovery, impairing consumers’ ability to proceed on behalf of a class,
and to reduce compensatory and punitive damage awards.
The arbitral forum can be very unfair to consumers and is deficient in a
number of ways: discovery is not available as a matter of right, the proceedings are secret, the arbitrator need not follow precedent or
explain the reasons for his or her decision, and the decision is immune
from judicial review, except on very narrow grounds, even if it is wrong as a matter of fact and law and results in manifest injustice. It can also be
inordinately expensive. Although it may be faster than litigation, there is no public policy served by a process which results in speedy injustice.
The Dangers of Mandatory Arbitration Clauses
Consumer protection in this country is in jeopardy, in particular in the extremely
important areas of credit and finance. All across the country, banks, financial
institutions and even automobile dealers are including standardized terms in
contracts of adhesion which provide that consumers agree to resolve any disputes
by arbitration and waive their rights to trial by judge or jury. The purpose and intent
of such clauses is to insulate unlawful, unfair, or deceptive practices from any
meaningful review. In arbitration, it is difficult to obtain discovery, and consumers
may not be able to proceed on behalf of a class, obtain injunctive relief against unlawful practices, or receive awards of punitive damages.
Arbitration is supposedly favored as a method of resolving disputes. But that
preference is derived from a series of Supreme Court cases between commercial
entities that had bargained for the speed and efficiency of arbitration, so the court
was merely enforcing their contractual agreement. Some courts are now using that
supposed preference to require arbitration in cases involving consumers who did not know about, negotiate, or accept the clause.
There simply is no public policy favoring arbitration as a mechanism of dispute
resolution but only a policy favoring the enforcement of the parties’ freely
negotiated agreements. The arbitral forum can be very unfair to consumers and is
deficient in a number of ways: discovery is not available as a matter of right, the
proceedings are secret, the arbitrator need not follow precedent or explain the
reasons for his or her decision, and the decision is immune from judicial review,
except on very narrow grounds, even if it is wrong as a matter of fact and law. It can
also be inordinately expensive. Although it may be faster than litigation, there is no
public policy served by a process that results in speedy injustice.
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