H.R. 1020 would permit parties to choose arbitration voluntarily, but prohibit corporations from forcing consumers into expensive, secretive, and biased arbitrations.
Myth: H.R. 1020 prohibits arbitration.
Fact: H.R. 1020 encourages voluntary arbitration; it only prohibits corporations from forcing mandatory clauses on consumers without their having a chance to negotiate the terms and often without their knowing about it.
Consider this example: When admitting his father into a nursing home, Charles Miller Jr. signed a lengthy contract that, unbeknownst to him at the time, contained a binding mandatory arbitration clause. His father was not seen by a physician until three weeks after his admission, during which time he lost 19 pounds and suffered from dehydration and pneumonia, all of which led to his death. Charles Miller Jr. filed a claim against the nursing home corporation, but a court held that because he had signed this contract, he would be forced into arbitration for his claims against the nursing home, under the terms the nursing home corporation chose to put into the contract. Because Charles Miller Jr. had unknowingly signed a contract that contained a mandatory arbitration clause before any dispute had arisen, he was bound by its terms, no matter how unjust.
Myth: Most consumers favor binding mandatory arbitration.
Fact: Consumers favor voluntary arbitration and being given the choice to arbitrate. Would an employee with a claim against Halliburton want Halliburton deciding how her claim should be handled? Would a homeowner with a claim against his home contractor want the contractor deciding how his claim should be handled?
The Chamber of Commerce’s recent study, which purported to show that voters did not support HR 1020, asked voters: “If you could choose the method by which any serious dispute would be settled between you and the company, which would you choose?” (Emphasis added.) But what they didn’t tell these voters is that binding mandatory arbitration takes away a consumer’s choice. Under the current system, consumers are not allowed to choose which option is best for them. They are not allowed to choose to file a claim in court nor are they allowed to choose who the arbitrator will be, or even what state they will have to arbitrate the claim in. Instead, they are forced into an arbitration system that is set up to favor the corporation and trample on the rights of the consumer. When consumers are given the choice to arbitrate after a dispute has arisen, they gain bargaining power and are better able to enter into an arbitration system that is fair.
Myth: Arbitrators are neutral, unbiased decision-makers.
Fact: Binding arbitration favors corporations because only corporations are repeat users of arbitration companies.
If an arbitration company wants to be used in a company’s mass consumer or employment contracts, the arbitration company has a huge financial incentive to appear favorable to those businesses in arbitration proceedings. Why would a company choose an arbitrator that rules against them?
Myth: Arbitration is cheap and more accessible to consumers.
Fact: Arbitration is so expensive that most consumers will not be able to pursue their claim against a corporation because they can’t afford the costs of the arbitrator.
Under mandatory arbitration clauses, consumers must pay steep filing fees just to initiate a case—seldom less than $750 – and pay their share of the arbitrator’s hourly charges, which are routinely $400 or more per hour. All these fees must be deposited in advance and almost always amount to thousands of dollars. In addition, arbitration clauses often allow the corporation to choose the location, regardless of how inconvenient or costly travel will be for the consumer.
Myth: Arbitrators are like judges; they have to follow the law and publicly state the reasons they made their decision.
Fact: Arbitrators are not bound by any laws. They do not have to follow the law and they don’t have make public or even provide to the consumer any explanation for ruling the way that they did.
Most arbitration clauses require that proceedings be kept confidential, even if the case raises important public policy issues. As a result, only the corporation can track past decisions and know which arbitrators have ruled for them. In addition, arbitrators do not set or follow judicial precedent, something our judicial system requires to ensure consistency and fairness in legal proceedings.