One of today’s gravest threats to consumer rights and constitutional protections can be found right under our noses.
Lurking in the fine print of countless agreements that few of us bother to read is a legal stipulation known as the forced arbitration clause. This legalese hides in all kinds of contracts for employment and consumer products, health insurance policies, credit card applications and nursing home admission forms.
If a dispute arises, forced arbitration is a boon for corporations and a bust for consumers. Civil disputes historically handled in court are instead diverted to a private hearing room – often far from where you live. Presiding arbitrators can be financially beholden to corporations that repeatedly hire them. There is no requirement for them to follow the rule of law. If bad things happen, there’s no appeal and the results are shrouded in secrecy.
But welcome action is afoot at both the state and federal level to counter the injustice of forced arbitration. A few weeks ago, the federal Consumer Financial Protection Bureau proposed restoring the rights of customers snagged by forced arbitration to instead bring class-action lawsuits against financial firms.
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Why are class-action suits important? Because history proves that the worst actors in the financial sector sometimes rip off large groups of customers for small-dollar amounts.
Individually, such customers don’t stand much of a chance against corporate giants. But collectively, they can get relief for thousands of customers while holding big business accountable. The result is better corporate behavior from coast to coast.
Here in California we’re working on bills in the Legislature in selective cases involving civil rights violations, elder abuse and military veterans illegally fired from civilian jobs.
These are mom-and-apple pie issues. But it’s never easy in our state Capitol. The California Chamber of Commerce last year opposed a labor-backed bill fighting forced arbitration in employment contracts that was ultimately vetoed by Gov. Jerry Brown.
This year, with Brown indicating he might accept a more targeted approach, the chamber has dug in at the Legislature. The half-dozen bills in the forced arbitration battle are drawing opposition not only from Republicans, but also business-backed Democrats. Tuesday afternoon, that coalition narrowly blocked a bill targeting arbitration of civil rights violations.
Instead of fighting such efforts, the chamber and corporate America should remember who their customers are. Arbitration itself isn’t bad; it’s been in voluntary use since 1925. But it’s best applied if both sides enter the arena on their own accord.
In this era of soaring income inequality, corporate giants can reap healthy profits and still do the right thing for their customers. It’s not only fair, it’s good business.
Elise R. Sanguinetti, an Oakland attorney, is president of Consumer Attorneys of California. She can be contacted at firstname.lastname@example.org.