Forced Arbitration Clauses: How Companies Eliminate Due Process for Their Customers

Buried in many everyday agreements for products, services, and jobs is fine print saying that, in any customer dispute with a company, the customer must accept forced arbitration before a decision-maker picked by the company. Many believe it’s a rigged system that helps companies evade responsibility for violating anti-discrimination, consumer protection, and public health laws. Michelle Schwartz with the Alliance for Justice, discusses the problem, which is also the subject of an AFJ video documentary, “Lost in the Fine Print (2014).”

Michelle Schwartz

Michelle Schwartz

The documentary tells the stories of three everyday Americans who were forced into arbitrations. The purpose of the campaign is to educate people about the many types of contracts that include these clauses. The Alliance for Justice wants to provide ways for people to fight back against these forced arbitrations.

At present, the Consumer Financial Protection Bureau has the authority to ban forced arbitration in consumer financial contracts, such as credit card, bank checking account, and student loan agreements. President Obama also moved by using an executive order forbidding companies with significant federal work could not have forced arbitration for their employees.

Forced arbitration is also used in employment agreements, and these agreements can take away rights conferred on employees by federal law. For example, a forced arbitration agreement can circumvent a woman’s rights under the Lilly Ledbetter Fair Pay Act. Sexual harassment can also be sidestepped by forced arbitration. The use of a forced arbitration clause to get around a woman’s employment rights is one of the stories in the AFJ documentary.

One study found that, when cases went into arbitration, the company won 94% of the time in forced arbitrations.

Michelle Schwartz is the Director of Justice Programs for the Alliance for Justice. Michelle Schwartz directs all of AFJ’s programs related to justice, including its highly-regarded judicial selection project, its Supreme Court analysis, and its access to justice work. Before joining AFJ, Michelle served for six years as a senior staff member for U.S. Senator Frank R. Lautenberg from her home state of New Jersey. The media frequently call upon Michelle for her expertise on judicial nominations, the Supreme Court, and Senate procedure, and she has appeared in media outlets such as Huffington Post, Politico, Pacifica Radio, American Prospect, and The Hill. The Legal Broadcast Network is a featured network of the Sequence Media Group.

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