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Jul 27, 2009 -- More flaws in mandatory arbitration revealed

Clark admits he's sounded like a broken record in the past while constantly repeating a refrain about the dangers of kangaroo court arbitrations imposed on us by corporate America.

Arbitration is set up by companies to take advantage of you. Sounds like just rhetoric to you? Consider this: Recent Congressional hearings found that companies actually use software programs to calculate how often an arbitration firm will rule in their favor and the dollar amount of each ruling.

If a certain arbitrator isn't up to snuff, they get fired. A company can then turn around and change the terms and conditions on customers before hiring a new arbitrator more likely to rule in their favor.

Minnesota's Attorney General Lori Swanson recently testified in Congress about abuses going on in the arbitration forums. Some collection agencies even use the rulings of these kangaroo courts as an excuse to garnish your wages or empty your checking or savings account.

Of course, there are ways to fix this. This "scandal a day" approach may lead to reforms that come up with a more equitable approach. For starters, Clark believes mandatory arbitration should be banned from all contracts between employers and employees and businesses and consumers.

Unfortunately, Clark won't be able to answer any questions submitted via commenting. If you have a question, please try posting it to our message boards.

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What others are saying

  • Arbitration
    I support the Arbitration Fairness Act in congress which would make these pre-dispute, binding mandatory arbitration clauses unenforceable. Consumers would still have to KNOW they have the right to refuse to comply w/an unenforceable clause, and they'd still need to know to refuse to arbitrate "voluntarily" after a dispute arose if the conditions were less than fair. But it would at least give consumers a huge advantage by letting them retain their right to use the courts. That right gives consumers a great deal of leverage to settle disputes before it goes as far as a lawsuit, because companies engaging in wrongdoing know they will often lose in court, and they know court records are public, whereas arbitration is private and hidden. More can be found out about the bill in congress, and abuses of arbitration at FairArbitrationNow.org. If you are a potential home buyer or homeowner be sure to read their recent report on how it affects the housing industry, "Home Court Advantage." Even if you think you avoided an arbitration clause with a builder or other party, think again--it is almost certainly in any "home warranty" policy you got as a gift from a builder, real estate agent, or seller.
  • Why not modify the clause?
    In California you have the right to have a court review an arbitrator's decision for errors of law. If the arbitration clause references Federal law, you don't. You can cross out reference to the Federal law and initial the change.
  • No choice but Arbitration
    I do consulting work for large developers. They refuse to do business with me without the Arbitration clause being included in the contract. If you want the work you accept the terms or loose the contract. So just sign and pray there are no problems because the cards are stacked against you.
  • Arb Forms
    My company includes an arbitration agreement with each contract. The customer must sign it for us to do business initially. The second paragraph on the agreement states they can reject the arbitration by sending written request to our home office. In an ideal world, arbitration saves everyone tons of time and money by not having to go through our horribly slow civil court situation.
  • You Don't Win in Arbitration
    I know more than I ever wanted to know about arbitration and the bottom-line is you won't win 98% of the time if you go to arbitration even with the most solid of evidence. Plus, arbitration results are not recorded for public record. Why do you think companies are so anxious to put this in their contracts? It's not because it's easier for YOU. Not only that, home builders won't sell to you if you don't sign. It's a very crooked system. Very, very crooked.
  • Arbitration
    I recently bought a new Toyota from a dealer in the Atlanta area. As part of the closing paperwork, the salesman put a document that declared I would waive my legal rights in lieu of arbitration. He said this was standard procedure and didn't really mean anything. I signed it. Would he have stopped the sale if I had refused? I doubt it. I was stupid for signing and would never do so again.
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