Wednesday, March 21, 2007

Mandatory Arbitration Abuses

What is buried in the fine print of your credit card subscriber agreement, your cable service agreement or your banking rules? Chances are there's a mandatory arbitration agreement buried in there. Sometimes it was there from when you first signed on, but more commonly, it's put there after the fact. What did that recent credit card mailer say?

The theory behind arbitration was not a bad one. We were told that arbitration would lead to quicker decisions and save consumers money. But there are big problems in practice, and mostly it's about the bad guys feeding at the trough.

Sometimes, the mandatory arbitration clause is nothing more than fine print that means, "consumers who use our service surrender all rights. " Take Comcast Cable, for example. In a recent Oregon case, Comcast tried to enforce an arbitation clause that stripped its subscribers of rights provided by Oregon law. Paul & Sugerman represented the consumers and obtained a good decision from the Oregon Court of Appeals. (The Court of Appeals threw out the clause. A copy is at

Horror stories about the fun-house mirror world of arbitration are wide-spread. One of industry's favorite providers, National Arbitration Forum, apparently uses two sets of rules. Banks, credit card companies, and the like get the more favorable set of rules, of course. And consumers get nailed. See the story at

Kudos to the Oregon Court of Appeals for properly applying the law. More important, Congress is finallystarting to take notice of the arbitration sham. Maybe if we keep shining bright lights on these practices, we'll be able to end the abuses.

David F. Sugerman
Paul & Sugerman, PC

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