Our "Issues" section documents the various ways that companies force arbitration on Americans. These include legitimate businesses as well as shadier industries like payday lending and loans for students at unaccredited, for-profit trade schools. A recent report by Consumer Federation of America has uncovered yet another shady industry using forced arbitration to immunize itself from accountability to its consumers: for-profit identity theft services.
More on these services and their abuse of forced arbitration after the jump…
Basically, credit monitoring companies charge consumers money to monitor their credit ratings for identity theft or other negative activity. The problems for consumers are that 1) none of the services can live up to their claims of complete protection, and 2) many of the benefits that these services advertise are things that consumers can do on their own for free or at minimal cost.
The report’s findings on forced arbitration (from p. 51 of the report):
Half of the identity theft services we examined require in their terms of service that customers submit any disputes about this service to binding arbitration. Mandatory binding arbitration is aimed at preventing consumers from going to court if they believe that the company has misled them or failed to honor the promises it made. Since these agreements are one-sided, with no ability for the consumer to negotiate, we believe that requirements for mandatory binding arbitration are unfair. Identity theft services should provide alternative dispute resolution as an option but not a requirement in their terms of service.
We couldn’t agree more. If consumers feel that these companies have violated their rights and engaged in unfair or deceptive acts, they should have the ability to take those claims to a court that will enforce the law.
It’s time to close the arbitration loophole that allows companies to ignore consumers’ rights.