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Published: September 2009

Forced arbitration ubiquitous in consumer contracts

A report from Public Citizen reveals that mandatory binding arbitration clauses, or “forced arbitration,” are prevalent in consumer contracts. Seventy-five percent of companies in eight industries used forced arbitration, according to the report.

Download Public Citizen's report "Forced Arbitration: Unfair and Everywhere"

Below is an excerpt from the report:

Despite a scandal that compelled one of the largest binding arbitration firms to close its consumer arbitration business and another major provider to acknowledge “legitimate concerns” surrounding debt collection arbitrations, forced arbitration remains almost ubiquitous in many industries.

Posing as prospective customers, we queried major players in seven industries – credit cards, banks, cell phones, computer manufacturers, cable television and high-speed Internet, auto dealers, and brokerages – to determine whether they impose binding arbitration on their customers. We supplemented our findings from these queries with data on major home builders that we published in our May report, “Home Court Advantage: How the Building Industry Uses Forced Arbitration to Evade Accountability.”

Of companies from which we obtained answers, 75 percent use mandatory binding arbitration, and nearly two-thirds force consumers to accept these terms as a condition of doing business. These findings omit auto dealerships, where we believe arbitration is nearly universal but few businesses would provide clear information. By contrast, recent polling shows that 79 percent of consumers expect that they can sue a company if they have a dispute, and 64 percent have no recollection of seeing anything about arbitration in the terms of agreement for goods and services.

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Public Citizen

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