A Closer Look at Mandatory Arbitration for Consumers

Summary

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Buy a house, buy or rent a car or other consumer product, schedule surgery, apply for employment, or open a bank, credit card, or brokerage account, and an arbitration provision will likely be part of the bargain. An increasing number of courts have agreed, on contract grounds, that mandatory arbitration provisions may be unenforceable because they are unconscionable, particularly if the effect of the provision is also to cancel a right to assert on behalf of a class claims that cannot realistically be asserted by individuals.

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Extract

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A Closer Look at Mandatory Arbitration for Consumers

In the John Warner National Defense Authorization Act of 2007, Congress made it unlawful for a lender extending consumer credit to an active duty member of the military or his or her dependent to require the borrower to submit to arbitration. A pending bill, S.2636, would permit a bankruptcy court to decide a core proceeding involving an individual debtor whose debts are "primarily consumer debts" notwithstanding an agreement to arbitrate. H.R. 3010, the Arbitration Fairness Act of 2007, introduced in both houses of Congress, is far ...

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