STUDY: 99% OF CONSUMERS UNAWARE THEY ARE SUBJECT TO FORCED ARBITRATION

For Immediate Release

July 27, 2023

STUDY: 99% OF CONSUMERS UNAWARE THEY ARE SUBJECT TO FORCED ARBITRATION

[WASHINGTON, D.C.] – A new study confirms that Americans are unaware of how often and to what extent they are stripped of their fundamental rights through prevalent forced arbitration clauses, which are found in the fine print of everyday click-through agreements, terms and conditions and other contracts. Consumers’ lack of understanding points to the need for formal rulemaking by the Consumer Financial Protection Bureau (CFPB) to rein in the use of forced arbitration, a tool used by corporations to eliminate consumers’ rights.

Forced arbitration is a one-sided and rigged process engineered by corporations to escape public accountability. Tucked away in the fine print of most consumer terms and conditions, forced arbitration denies Americans their choice in how to access justice when they’ve been hurt or defrauded by corporations, simply because they signed up for a service or used a product. Forced arbitration enables repeat offenders to continue hurting consumers by avoiding public transparency and accountability.

University of Michigan law and psychology professor Dr. Roseanna Sommers’ recently released study on forced arbitration paints a bleak picture, that Americans have no idea the gravity and breadth of fundamental rights they are losing simply by signing up for services, or using a product:

• More than 99% of consumers who use popular products and services such as Netflix, Cash App, or Hulu, had no idea they are subject to forced arbitration.
• Less than 5% of consumers could recall reading anything about forced arbitration, even when presented with typical consumer terms and conditions containing a forced arbitration clause.
• Less than 1% of consumers correctly understood that forced arbitration robs them of their fundamental and constitutional right to seek accountability through public courts.
• Less than 5% of consumers understood they would not be able to appeal a clearly unfair or biased decision.
• Even in the rare circumstance that corporations let Americans “opt-out” of forced arbitration, Professor Sommers’ study confirmed that the burdensome hoops consumers must jump through, such as sending a letter via snail mail, makes them thoroughly meaningless.

“Forced arbitration deprives Americans of their fundamental right to decide how seek public accountability and justice,” said Linda Lipsen, CEO of the American Association for Justice. “This study confirms the need for the CFPB to take action to restore the rights of Americans to decide for themselves how to hold big banks responsible for their fraudulent and wrongful actions.”

“Prof. Sommers’ research swipes away the fig leaf that corporations use to rationalize forcing arbitration contractual provisions on consumers: the claim that consumers knowingly and voluntarily agree to such measures,” said Robert Weissman, president of Public Citizen. “Prof. Sommers’ work shows conclusively that consumers don’t know they are agreeing to arbitration, and even if they did, they wouldn’t know what they are getting into. The Consumer Financial Protection Bureau (CFPB) should act now to permit arbitration only when the consumer chooses it after a legal dispute has arisen.”

Forced arbitration clauses are pervasive in the boilerplate terms and conditions of everyday products and services, and consumers have little or no awareness that critical rights and choices have been stolen from them, until it’s too late,” said Christine Hines, legislative director at the National Association of Consumer Advocates. “Professor Sommers’ study is a sober reminder that it’s way past time for these sneaky contract provisions that disarm the powerless and protect the powerful to be gone.”

“Consumers shouldn’t be silenced by big corporations that harm them. But that’s what happens when fine-print traps take away people’s right to a day in court or to join class actions to seek just compensation,” said Shennan Kavanagh, senior attorney at the National Consumer Law Center. “As many as 99% of consumers surveyed have handed over their constitutional rights lock, stock, and barrel by accepting terms they didn’t realize contained forced arbitration clauses. Businesses should be willing to stand by the goods and services they provide and not hide behind contracts that dupe consumers. It’s time Congress and regulators eliminated these ‘gotcha’ clauses.”

“Professor Sommers’ study confirms what we’ve long known: arbitration agreements embedded in consumer contracts aren’t really agreements at all,” said Paul Bland, Executive Director of Public Justice. “Consumers don’t even know that there are arbitration clauses in the terms of service for their phone plans or bank accounts. And even when consumers are aware of an arbitration provision, they don’t understand that they are signing away their right to go to court. It’s time for the Consumer Financial Protection Bureau to empower consumers and end forced arbitration.”

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