“Win or lose, do it fairly.” –Knute Rockne

By Christine Anderson Ferraris

Arbitration clauses are found in contracts for car purchases, home construction, bank accounts, student loans, cell phones, employment, nursing homes and more. Arbitration is a private procedure in which a legal dispute is submitted to make a binding decision on the dispute. When arbitration is mandatory it deprives of the opportunity to go to court. Arbitration can force unsophisticated consumers and small business owners into a system that may be biased toward a large corporation. Unlike our judicial system, which is public, arbitration is secretive and often does not enforce the legal protections of state and federal laws.

Arbitration Can Limit Legal Rights & Protections

Forced arbitration clauses can take away Arizonans’ constitutional right to a day in court. Instead of a judge, a private arbitrator decides disputes in a closed proceeding with no appeal. Forced arbitration clauses often prohibit people from joining together in class actions to fight widespread wrongdoing.

Forced arbitration clauses can have direct negative impacts on our servicemembers and veterans. Banks and other lending institutions use mandatory arbitration clauses in loans issued to Arizona’s approximately 33,265 active-duty servicemembers and reservists and to Arizona’s veterans. These forced arbitration mandates extinguish servicemembers’ protections under the Servicemembers Civil Relief Act and allows financial institutions free rein for misconduct, such as unlawful repossession of active-duty servicemembers’ vehicles. Because many banks have arbitration clauses in their auto loan contracts, servicemembers should pay attention and not agree to the arbitration provision that waives their rights.

Abusive debt collectors are among the top complaints by servicemembers; the Federal Trade Commission receives more than 10,000 complaints annually from servicemembers and Arizonans. Out-of-state debt buyers often harass citizens and violate Arizona law; they use forced arbitration clauses to block people from going to court to challenge the unlawful conduct.

Arizona students too have been harmed by forced arbitration. Corinthian Colleges, a for profit institution found to have committed predatory practices against students, has used forced arbitration clauses to block class actions over their fraudulent conduct. Navient (formerly Sallie Mae), the largest servicer of private student loans, was sued for failing to allocate loan payments properly and deceived borrowers about how to release co-signers. Arizona students were prevented from collectively pursuing Navient because of an arbitration clause in their loans. Students have also fallen prey to fly-by-night student loan debt relief companies; many use forced arbitration clauses that take away legal rights when they commit fraud.

The Forced Arbitration Injustice Repeal (FAIR) Act

Congress, in its current session, once again will consider legislation to prohibit mandatory pre-dispute arbitration agreements and class action waivers in employment, consumer, antitrust, and civil rights disputes. The Forced Arbitration Injustice Repeal (FAIR) Act is legislation that would allow arbitration to be voluntary, allowing aggrieved individuals and businesses the opportunity to choose arbitration or the courts; it would not change collective bargaining agreements that require arbitration between unions and employers.
If you are interested in learning more about the FAIR Act, go to the government site here: https://www.govtrack.us/congress/bills/116/s610/summary. If you wish to contact your representatives about the FAIR Act go here to find your representative: https://www.house.gov/representatives/find-your-representative.

The information provided does not, and is not intended to, constitute legal advice; instead, our purpose is to provide general information. The information provided may not constitute the most up-to-date information. Links provided are only for the convenience of the reader. A. Ferraris Law, PLLC and its members do not endorse the contents of the third-party references.

Christine Anderson Ferraris and her firm, A. Ferraris Law, assist consumers and business owners harmed by the government, or another business. She has been for several years the race director for the CV50/50 children’s trail run in Colossal Cave Mountain Park each November.

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