For years companies have instituted forced pre-dispute arbitration clauses into contracts with their customers. Forced arbitration means exactly that: when a dispute arises between a company and customers, they cannot sue the company. It must be heard in binding arbitration.
On the surface that seems unfair to consumers. A new study has determined this perception to be true.
The federal government’s Consumer Financial Protection Bureau recently released the findings of its five-year study examining arbitration agreements with financial service companies. The survey determined that millions of individuals are denied the legal right of a class action lawsuit when they’ve been wronged by a financial service provider, such as a credit card company or a bank. Eighty million credit card holders alone were found to be subject to pre-dispute arbitration.
The study revealed that 75 percent of consumers didn’t know if they were subject to an arbitration clause, and only 7 percent of those subject to the clause knew that it limited their right to sue.
Overall, Companies Win and Consumers Lose in Arbitration
It also found that when a dispute goes to arbitration rather than a class action lawsuit, the company usually is the big winner. The agency reviewed 1,060 financial services arbitration cases filed in 2010 and 2011 and reported:
• Consumers in all cases combined received less than $175,000 in damages
• Consumers were forced to pay companies $2.8 million
However, the agency found that consumers received over $2.7 billion in settlements from financial services companies during the study’s five-year period via class action lawsuits.
Class action lawsuits represent many people harmed similarly by the wrongful actions of a big company. They are an effective way for individuals to take on an imposing corporate entity and pursue justice, while also getting companies to stop their bad behavior.
If you believe you’ve suffered financial losses due to consumer fraud or other negligent corporate behavior, contact an attorney experienced in conducting class action lawsuits to review your claim.
The choice of a lawyer is an important decision that should not be based solely on advertising.