Published by NBC12 On Your Side Alerts
By Gray Hall
"You find them almost everywhere: car contracts, computer purchases, credit cards. But most people probably have not read those lengthy consumer contracts. When you agree to them, many times you're giving up your rights to file a dispute in court. Should the rules change? Right now, one government agency is researching the impact to consumers.
Many times, buried in those consumer contracts are arbitration clauses . Consumer Attorney John Gayle says signing them takes away your right to a jury trial if there is a problem. "If you are going to give up your Constitutional Right, then you ought to know that you are doing it and voluntarily choose to do so," Gayle said.
For the Consumer Financial Protection Bureau, the focus is on credit cards, checking accounts, and re-loadable prepaid cards. While Gayle said he thinks there needs to be more transparency, he acknowledged consumers also have a role to play. "We are responsible for what we sign. So it is difficult to win in court to tell a judge, 'your Honor, I did sign it and it was on page 3, and I didn't read it, so don't hold me responsible for it,'" Gayle explained.
This is still a work in progress. After its findings the CFPB will then report to Congress but, for now, it is still working to determine if anything needs to be changed. Prof. Jim Gibson, a law professor at the University of Richmond, has been keeping an eye on the study. "The dirty little secret of arbitration clauses is that they usually prohibit participation in Class Action lawsuits. Most corporations aren't worried about individual suits from consumers, what they are worried about is those consumers banding together," he said.
Gibson doesn't expect the clauses to disappear. "The argument the bank would make is that arbitration would get you the same result, but would do so more cheaply. It's not as expensive as court. I think that is true, if the arbitration clause is a fair one," Gibson said.
Bruce Whitehurst with the Virginia Bankers Association agrees, and says this research doesn't indicate there's an existing problem. "I think the bigger issue is, if we were to see a big move away from arbitration or a forced move to litigation then again, that is going to add cost and time, not only for companies but also consumers," he said.
The American Arbitration Association is in favor for the study. It released a statement that said, "American Arbitration Association supports the study of CFPB on the subject of Consumer to Business arbitration. We believe thoughtful, careful balance is necessary to provide a level field, as exemplified in our Consumer Due Process Protocols. The results of the study should be useful to provide future guidance for a balanced process."
So far, the research shows larger banks are more likely to include the arbitration clauses rather smaller banks and credit unions. The CFPB expects to release the second phase of its study later this year. "