The New York Times published an editorial explaining how arbitration is a “rigged” system.  “Arbitration and class action waiver clauses effectively immunize companies from illegal and fraudulent conduct. Virtually every sizable company has such clauses.”

“There are several reasons that companies have these provisions: 1) arbitrations are almost impossible for customers to pursue because they are too expensive (class actions allow costs to be shared over thousands of wronged individuals); 2) arbitrations do not allow discovery of the institution’s internal records (as lawsuits do); 3) arbitrations are often required to be held in a city far from the wronged party; and 4) the arbitrators tend to favor the institutions, which can offer them repeat business. This is a perfect example of what many have called a system rigged against the average person.”

Congress (Democrats and Republicans alike) could not find the gumption to act on the proposed Arbitration Fairness Act, first introduced in 2009, which would have outlawed such provisions in consumer and employment contracts. Finally, years later the Consumer Financial Protection Bureau adopted a rule that would achieve some of that goal, and now the Republicans in Congress are trying to undo that rule before it goes into effect.

Until and unless wrongdoers know that they face the risk of having to actually answer to those they wrong, they will never change their conduct.

 

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