Consumers don’t understand arbitration clauses in agreements and contracts that limit their right to go to court when they have a dispute, study shows
Most Americans don’t know how often they’re stripped of their rights through widely used forced arbitration clauses that are found in the fine print of everyday click-through agreements, terms and conditions, and other contracts, according to a new study.
Arbitration clauses require consumers who have complaints to settle issues through arbitration rather than filing a lawsuit.
“Consumers shouldn’t be silenced by big corporations that harm them,” said Shennan Kavanagh, senior attorney at the National Consumer Law Center, an organization that specializes in consumer issues on behalf of low-income people. “Businesses should be willing to stand by the goods and services they provide and not hide behind contracts that dupe consumers.”
Americans have no idea of the gravity and breadth of fundamental rights they’re losing by signing up for services, or using a product, said Roseanna Sommers, Ph.D., University of Michigan law and psychology professor, who recently released a study on forced arbitration. It shows:
- More than 99 percent of consumers who use popular products and services such as Netflix, Cash App, or Hulu, had no idea they’re subject to forced arbitration.
- Less than 5 percent of consumers could recall reading anything about forced arbitration, even when shown typical consumer terms and conditions containing a forced arbitration clause.
- Fewer than 1 percent of consumers correctly understood that forced arbitration robs them of their right, protected by the Seventh Amendment, to seek a resolution through the courts.
- Less than 5 percent of consumers understood they wouldn’t be able to appeal a clearly legally wrong, unfair, or biased decision determined through arbitration.
- Even in the few circumstance that corporations let Americans “opt-out” of forced arbitration, the study shows that the hoops consumers need to jump through, such as sending a letter through the mail in a short period of time, makes that option thoroughly meaningless.
It’s time Congress and regulators eliminated these “gotcha,” forced arbitration clauses, Kavanagh said.
The Consumer Financial Protection Bureau should act now to permit arbitration only when the consumer chooses it after a legal dispute has arisen,” said Robert Weissman, president of Public Citizen, a consumer rights advocacy group.
For more information, see “How to Opt-Out of a Forced Arbitration Clause.”