ORLANDO,Fla. — Action 9 investigated hidden traps in many consumer contracts, from cellphones to new homes, that could leave you feeling cheated and denied your day in court.
Arbitration clauses now turn up almost everywhere, and Action 9's Todd Ulrich found it forces consumers to accept the company's version of justice and there's no way out.
When Mark James' air conditioning AC unit failed, he thought he had protection. Then Choice Home Warranty kept rejecting his claim.
He sued Choice Home in court, but then discovered in his contract's fine print that he had unknowingly agreed to forced arbitration only to settle disputes.
“I think it's quite disgraceful. I think you should be able to go to court in any dispute,” said James.
The mandatory arbitration clauses are just about everywhere, including credit card, and cellphone contracts.
They can also be found anytime you shop online.
Buried in the sales agreements is language spelling out that there will be no day in court, just an arbitration panel picked by the company. That goes for big-ticket items too.
“It's not justifiable. It's not fair," James said.
Hardat Rai lost $40,000 trying to buy a new Lennar Home. That's the deposit he says Lennar refused to refund after his financing died.
He wants to sue but his contract's arbitration clause makes that so tough.
“There it's a one sided affair where you cannot go up against them,” said Rai, “It’s like the fox guarding the hen house.”
Buy a new car and it's a sure bet that clause is in your contract.
“You absolutely sign away your rights.” Attorney Taras Rudnitsky routinely turns away local new car buyers who felt cheated by dealers because their contracts had forced arbitration.
Consumer advocates say it eliminates impartial juries, can cost more, and there are no appeals.
“Many lawyers won't handle a case because of arbitration. They think the deck is simply stacked,” said Rudnitsky.
When buying, you can cross out an arbitration clause but chances are the company will show you the door.
“It's not fair. That's a one-way clause,” said James.
The arbitration clause also prevents you from joining class-action lawsuits to fight fraud.
The Consumer Financial Protection Bureau is considering reforms this year to limit such restrictions.
Cox Media Group