Don't click away your day in court: Beware e-commerce "Binding arbitration" clause

Have you heard about "binding arbitration" clauses in contracts? They're the part of the contract which states that if you have a dispute with the other party, you can't take them to court. You agree, instead, to go before an arbitration panel with your dispute. (Note that many claim the arbitration panels are notoriously unfavorable to consumers!)

Binding arbitration clauses are all over the place these days. They're in most credit card agreements, and are very often found in car purchase documents, home construction contracts, and all sorts of other contracts. And you may not even realize you're agreeing to this mandatory arbitration.

Have you ever made a purchase online and failed to read the fine print? You just clicked on "I agree to the terms and conditions"? Well if you did that at, you've agreed to mandatory arbitration.
A judge recently dismissed a lawsuit filed by Shandie Deaton against for claimed violations of the Fair Credit Reporting Act (FCRA). She says that violated that law by printing too much credit card information on the receipt for her purchase from the company. A class action suit was filed on behalf of her and everyone else who had credit card information printed on their receipts in violation of the law.

But the lawsuit was dismissed because each time a customer purchases something on, they enter into this binding arbitration clause. That means no lawsuit filed in court. Customers must go before the arbitration board if they want a remedy to the wrong, and they must go one by one. No class action status.

Think this through the next time you're making a purchase and this clause is in the contract. Do you really want to give up your right to go to court? Do you really want to give up your right to appeal a decision? Because decisions in arbitration are final. There is no appeal and there is no do-over if something was handled inappropriately.

Consumers need to stand up against these binding arbitration clauses and refuse to give their money to companies like that force this arbitration clause upon them.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
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