Gone Too Far: Forced Arbitration In Consumer Contracts

The Federal Arbitration Act was enacted in 1925 to promote the use of arbitration as an efficient dispute resolution method. Sadly, in the context of consumer agreements, arbitration has become a method for companies to avoid liability for fraud and other illegal actions. To be fair, when parties of equal bargaining power have negotiated a contract at arm's length and agreed to arbitrate disputes, the result may be considered fair. But in recent years, the use of forced arbitration in boiler plate consumer contracts has become abusive.

Consumer contracts for everything from insurance to cell phone service to lingerie to leases to software licenses contain arbitration agreements. These agreements are all contracts of adhesion, that is, take-it-or-leave-it agreements drafted by the business. Thus, the party (the business) with the greater bargaining power presents these agreements to the party with the lesser bargaining power (consumers) who have no choice but