The Importance Of Arbitration Clauses In Consumer Contracts

Consumer contracts contain important information that establishes the terms and agreements between a minimum of two parties. Since the 18th century, arbitration has been in use in the United States. Under the Federal Arbitration Act, courts enforce consumer contracts that have arbitration clauses. In order to determine if a contract is unconscionable, courts use a case-by-case analysis. Following the Supreme Court ruling in the AT&T Mobility v. Concepcion (2011) case, arbitration clauses in consumer contracts became a debatable topic. Corporations and other individuals are in favor of arbitration because of its efficiency in resolving disputes, the financial benefits the consumer as well as the corporation profit from, in addition

Essentially, the arbitration process includes: arbitrator selection, preliminary hearing, exchange of information, and the hearings. Corporations arbitrate more than a consumer would. Corporations tend to have a better understanding of the logistics of arbitrating; which could potentially give them an advantage over the average consumer. “A recent study conducted by the consumer advocacy group, Public Citizen, stated that arbitration agreements are confidential, but corporations are repeat users, hence they know more than consumers about the procedures” (Jost, 2008, p. 1) The average consumer is at a disadvantage because of the lack of knowledge they may know about the arbitration process.
Additionally, consumers also believe that they do not have an advantage in arbitration clauses because of its unfairness. Almost all of the companies in the cell phone market have an arbitration clause in their consumer contracts. A study was done by the Consumer Financial Protection Bureau, on financial service providers. The results exhibited that “99.9% of the companies in the market for mobile wireless phones had an arbitration clause in their contract. Likewise, more than 90% of the arbitration clauses studied included bans on consumers joining class-action lawsuits.” (Jost, 2016, p.