Released: February 24, 2005

Alliance aims to eradicate binding mandatory arbitration clauses

BMA targeted by national consumer and civil rights groups with an educational web site, legislation and tools to empower consumers

Contact: CONTACT: Linda Sherry, Consumer Action - DC, (202) 544-3088 or Ken McEldowney, Consumer Action - San Francisco, (415) 777-9648

Washington, D.C. - Consumer Action has joined more than two dozen national public interest organizations to launch a nationwide effort to stop the corporate use of binding mandatory arbitration (BMA) clauses, legal requirements tucked in the fine print of contracts that force millions of consumers unwittingly to waive their right to access the courts. Consumer Action has a record of successfully challenging consumer mandatory arbitration requirements. With representation by Trial Lawyers for Public Justice, Consumer Action and Darcy Ting in 2003 prevailed as plaintiffs in Ting vs. AT&T, ensuring that AT&T will not impose mandatory arbitration on its California customers. As a plaintiff in the 1998 case Badie vs. Bank of America, Consumer Action was represented by attorney Jim Sturdevant in its successful challenge of the enforceability of a new, across-the-board arbitration requirement for all of the bank's deposit and credit card account agreements. There is probably not a single adult in the United States who is not subject to at least one or more binding mandatory arbitration clauses. Buried in the fine print of credit card billing inserts, health insurance plans, employee handbooks and even standard purchase contracts, the clauses require consumers to waive their right to go to court if a dispute arises with the company involved in the transaction. Cases are funneled to a costly private legal system that favors companies and operates outside the law; arbitrators are not bound to use legal precedent or even good sense in making their rulings, and an arbitrator's rulings can't be appealed. This means that homeowners ripped off by a shady mortgage broker, patients denied medical coverage by an HMO, employees victimized by discrimination, and consumers caught in credit card billing scams cannot take their claims to court. "Consumers are often unaware they've agreed to binding arbitration. We suggest that you read the fine print of all contracts and service agreements," said Linda Sherry, Consumer Action's editorial director. "If you find a BMA clause, vote with your feet and walk away. No deal is worth giving up your right to your day in court." "We are starting a campaign to stop the use of binding mandatory arbitration clauses, which Big Business is now forcing on unknowing consumers in billions of pre-printed, take-it-or-leave-it contracts as part of its larger push to avoid oversight and accountability for fraud and deception," said Joan Claybrook, president of Public Citizen. "It is galling that corporations are systematically denying individuals their right to go to court." "At Trial Lawyers for Public Justice, we have been repeatedly asked for help by consumers and employees who had strong legal claims, but were being forced into arbitration systems badly tilted in favor of corporate defendants," said Paul Bland, staff attorney. "These persons find it hard to believe that something so unfair could happen to them in America, but it happens to people every day. Under our current system, the fine print of BMA provisions in corporate contracts can and does hurt people who have been ripped off by corporate wrongdoing." The groups' 10-point platform aims to highlight the widespread use of BMAs and provide tools to empower consumers to fight BMA clauses. In it, the groups pledge to: - Launch the Stop BMA site to educate consumers about BMA clauses (http://www.stopbma.org). - Conduct a campaign to let consumers know which companies don't use BMA clauses. - Encourage consumers to close credit cards that have BMA clauses and call on credit card companies to remove BMA clauses from their contracts. - Encourage homebuyers seeking mortgages to avoid lenders that use BMA clauses. - Urge consumers to avoid auto dealers and auto financers that use BMA clauses. - Call for auto dealers to remove BMA clauses from their contracts. - Provide bill stuffers for consumers to send with their payments to repudiate BMA clauses. - Urge large membership organizations to insist that partners providing services to their members, such as credit card and mutual fund companies, remove BMA clauses from their group contracts as a condition of offering products to their members. - Conduct a nationwide campaign promoting the passage of model state laws limiting the use of BMA clauses. - Call for congressional hearings on BMA clauses and for legislation prohibiting BMA. U.S. Sen. Patrick Leahy (D-Vt.) also expressed concern about the widespread use of binding mandatory arbitration clauses. "Contracts that trick consumers into signing away their legal rights through binding mandatory arbitration clauses buried in the fine print are not the fair way to do business," said Leahy, the ranking member on the Senate Judiciary Committee who has in the past co-sponsored legislation to prohibit these mandatory clauses in credit card holder and car dealer contracts. "It's an abuse that is quickly spreading, and it's time to blow the whistle and start giving consumers a break. I commend the coalition for shining a spotlight on this important consumer issue." (Alliance members include: ACORN, Alliance for Justice, American Association for People with Disabilities, Center for Auto Safety, Center for Responsible Lending, Consumer Action, Consumer Federation of America, Consumer Task Force for Automotive Issues, Consumers for Auto Reliability and Safety, Consumers Union, National Association of Consumer Advocates, Lawyers Committee For Civil Rights Under Law, National Community Reinvestment Coalition, National Consumer Law Center, National Employment Lawyers Association, Public Citizen, Senator Patrick Leahy, Trial Lawyers for Public Justice, U.S. Public Interest Research Group, Workplace Fairness)