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.