Forced Arbitration

Corporations, banks, and even employers throughout America are increasingly inserting forced arbitration clauses in their contracts with consumers, employers, and investors as a way to inoculate themselves against lawsuits. These clauses deny Americans their day in court, instead forcing them into secretive arbitration proceedings, which are often heavily weighted in the companies’ favor. In addition to barring the courthouse doors, these fine print clauses are also increasingly used to eliminate your right to join class action lawsuits against corporate wrongdoers like Wells Fargo, Equifax, and others.

Many consumers and workers have little or no choice when it comes to arbitration clauses, which increasingly impact nearly every aspect of Americans’ lives. For workers, agreeing to an arbitration clause often means the difference between being hired, or not. And nearly all credit card, mobile phone, and tech companies now include arbitration clauses in their user agreements and contracts, as do banks, healthcare companies, car dealers, and insurers. Some companies have gone so far as to argue that simply using a mobile app means you have agreed to arbitration.

Public Justice is proud to be a leader in educating the public about the harm of these clauses, and fighting them in the courts.

What Public Justice is Doing

Fighting Back in the Courts

Public Justice’s legal team constantly takes on arbitration clauses, and the corporations that use them, in the courts.

Often, banks and corporations try to “sneak” arbitration clauses past consumers in a way designed to ensure most people do not understand they’re agreeing to give up their right to go to court. Examples include a fine print clause buried in a service agreement on TransUnion’s website stipulating that you “agree” to arbitrate claims against the company simply by clicking a button. Or when Samsung hid an arbitration clause in the warranty section of the “Important Information” booklet stuffed in the box for their smartphones, assuming that silence from its consumers constituted an agreement.  We have successfully argued that such clauses are unenforceable.

Some of the most heinous tactics used to force consumers into arbitration are employed by payday lenders, who want to ensure their schemes locking borrowers into endless, high-interest rate debt never make it to court. Infamous payday lender Western Sky—which is technically owned by a member of the Cheyenne River Sioux Tribe—sought to enforce an arbitration clause that waived all federal and state law and required that arbitration be conducted by a representative of the Tribe. As it turns out, Western Sky is merely a front, and the real lender and profit-maker is the corporate payday lending company CashCall. In truth, there are no authorized representatives of the Tribe that conduct arbitration in the first place. When Public Justice sued, a court agreed with us that you cannot enforce an agreement that requires arbitration before an arbitrator who does not even exist.

The zombie debt industry, which buys up debt for pennies on the dollar with very little information on whether the debt is legitimately owed, similarly employs underhanded tactics to force consumers into arbitration. In one such case, Clifford Cain, Jr. tried to file a class action to recover illegal judgements and fee awards from a debt buyer that was operating without a required license. In response, Midland Funding tried to force Cain into arbitration even after having taken him to small claims court. Our legal team successfully argued that companies like Midland can’t have it both ways: Once they go to court, they can’t later decide they’d prefer arbitration.

At Public Justice, we look for cases to expand on these concepts and give workers, consumers and others a fair shot at fighting back against the fine print.

Legislative and Regulatory Battles

Wall Street, corporate America, and predatory lenders all love arbitration because it serves as a “Get Out of Jail Free” card for some of the worst actors in those industries. So it’s no surprise that their lobbyists push to protect arbitration on Capitol Hill. Public Justice ensures workers, consumers, and other Americans also have a voice in Congress by working to educate lawmakers about the harms of forced arbitration.

  • We’ve been a leading voice in educating lawmakers, and the public, about changes to a federal rule that also prohibited nursing homes from denying patients, and their families, their day in court.
  • We called out the Department of Education for proposing to allow for-profit colleges to use arbitration in settling disputes with young people.
  • We fought to defend a commonsense rule issued by the Consumer Financial Protection Bureau that would have prohibited financial institutions – like Wells Fargo – from forcing customers into arbitration while also denying them their right to join in class action lawsuits.

We’re proud to be a leading opponent of corporate America’s lobbying campaign to close the courthouse doors.

Court of Public Opinion

Despite the increased use of forced arbitration clauses in nearly every industry, most people have no idea their rights have been taken away until a dispute comes up and they start investigating their legal options. Public Justice works tirelessly to raise public awareness about what forced arbitration is and what real-world impacts it can have.

From working with the New York Times on a ground-breaking series exposing the dangers of forced arbitration, to educating the public via a special half-hour television documentary on the issue, our staff ensures the media – and the public – understand the truth about why corporations love arbitration, and how that hurts consumers and workers. We’re also using popular sites like Huffington Post and Daily Kos to reach those impacted by arbitration, and The Hill to reach Members of Congress on important legislative issues.

To stay up to date on our work fighting forced arbitration, sign up for our free monthly newsletter, here.

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