Strom Law Firm Columbia SC
No obligations & no credit card required

Arbitration Clauses Prevent Class Action Lawsuits and Hurt Consumers

Companies Use Arbitration Clauses to Prevent Class Action Lawsuits, Hurting Consumers

class action lawsuitsClass action lawsuits are large, consolidated cases involving plaintiffs who have been hurt by irresponsible business practices or defective products created by a large company. However, a recent survey showed that too many large companies use arbitration clauses to prevent consumers from filing class action lawsuits or seeking other types of relief, which can ultimately harm consumers, especially if they have been injured by a defective product or device.

The investigation was conducted by the Consumer Financial Protection Bureau and released on Wednesday, March 12th. Their survey found that 75% of consumers did not know, in many cases, that they were bound by an arbitration clause if they used a particular product. In fact, many consumers do not even know what an arbitration clause is.

Legally, an arbitration clause requires a consumer to resolve any dispute with a company through arbitration, which is a private process outside of the courtroom, rather than a class action lawsuit, in which other plaintiffs can join and resolve disputes as a group. Arbitration clauses allow businesses to resolve conflicts behind closed doors, so while they many times offer settlement amounts, they are not required to disclose those amounts to the public, which means consumers can receive different awards, or no awards at all, to “resolve” their dispute.

“Tens of millions of consumers are covered by arbitration clauses, but few know about them or understand their impact,” said Richard Cordray, Consumer Financial Protection Bureau (CFPB) director, in a statement. “Our study found that these arbitration clauses restrict consumer relief in disputes with financial companies by limiting class actions that provide millions of dollars in redress each year.”

The American Arbitration Association is the largest administrator of arbitration disputes in the US, and according to data, an average of 600 arbitration disputes were filed per year between 2010 and 2012. These disputes regularly involved credit card companies, loans, and other financial products, but can also involve medical devices, defective toys, or food safety concerns.

In one instance last year, General Mills attempted to update their privacy policy on their website to include an arbitration clause, which would bind consumers to forced arbitration processes if they ever consumed any of the thousands of General Mills products. Fortunately, consumers and the media got wind of the clause and forced the company to return to its original privacy policy.

Although arbitration clauses are too frequently invoked to prevent class action lawsuits, the clauses do not bar individual personal injury lawsuits or wrongful death cases involving defective products, food-borne pathogens, or other consumer harm. If you suffered an injury or financial loss due to a company’s negligence or failure to warn, even if you are bound by an arbitration clause, you still have legal recourse to go to court.

The Strom Law Firm Represents Victims in Class Action Lawsuits

The complex litigation attorneys at the Strom Law Firm understand that personal injury, financial loss, or a loved one’s death can cause you enough suffering, without having to go through an arbitration clause that could leave you without recourse. We offer free, confidential consultations to discuss the consumer harm you have experienced, and decide if a class action lawsuit is the right recourse for you. 803.252.4800

Share:

Facebook
Twitter
LinkedIn
Categories
Archives

Follow us

Sign Up For Our Newsletter!