I have previously written about the proliferation of mandatory arbitration agreements in virtually every contract, particularly consumer contracts, and the fact that state and federal courts almost always enforce these agreements.
Arbitration agreements require all disputes between the contracting parties to be submitted to binding arbitration before an arbiter who is typically selected by the party with the most economic clout or the party with the most to gain in the transaction. For example, the depository agreement with your bank has a mandatory arbitration agreement in it. That agreement specifies how your dispute will be resolved and who will make the decision. You have no say in the matter other than to not enter into the agreement at all. But, the problem you have is that all banks have similar arbitration agreements. So, your real choice is whether you want to have a banking relationship. If you do, you will have to sign,
Most people don’t realize that when they sign an arbitration agreement they are giving up completely and forever their legal right to have disputes decided in a court of law.
There is a slim chance this unfair situation could change. The new Consumer Financial Protection Bureau is considering regulations which could limit this practice. However, Republicans and lobbyists representing banks, credit card companies, and the financial industry are fighting these regulations tooth and nail just as they also fought the very creation of the Bureau.
Leading the fight for the big banks and other business interests is Jeb Hensarling, R-Dallas, who is Chairman of the House Financial Services Committee. According to him, the regulations would harm “very low and middle income consumers”.
If you want to test his argument, try to name or find a low or middle income person who was able to win a dispute against a bank, credit card company or stock brokerage company in arbitration. It just doesn’t happen and that is precisely why these companies want it.