The End Of Mandatory Arbitration Clauses For Consumers?

Bills go through congress like sand through the hourglass.  The two seem mixed together as well as the Gulf Coast and British Petroleum.  It’s no stretch of the imagination to say that lawmaking in Washington D.C. is anything but a long, slow and expensive process accessible by only society’s “elite” (and not the everymen they may like you to believe).  But every once in a while a good bill actually makes it through to become a law and change America for the better.  Well, it seems like we may be on the precipice of another such change.

There was a lot of text in that last link I know.  But buried beneath that 2,319 page document is a spectacular little provision that may be a big victory for consumers nationwide if this bill, titled the Dodd-Frank Wall Street Reform Act, goes through.  Here’s that relevant and important passage of text:

SEC. 1028. AUTHORITY TO RESTRICT MANDATORY PRE-DISPUTE ARBITRATION.

(a) STUDY AND REPORT – The Bureau shall conduct a study of, and shall provide a report to Congress concerning, the use of agreements providing for arbitration of any future dispute between covered persons and consumers in connection with the offering or providing of consumer financial products or services.

(b) FURTHER AUTHORITY – The Bureau, by regulation, may prohibit or impose conditions or limitations on the use of an agreement between a covered person and a consumer for a consumer financial product or service providing for arbitration of any future dispute between the parties, if the Bureau finds that such a prohibition or imposition of conditions or limitations is in the public interest and for the protection of consumers. The findings in such rule shall be consistent with the study conducted under subsection (a).”

Crazy, huh?  What this bill potentially means is that all those mandatory binding arbitration clauses may soon become a thing of the past.  You know, the kind of mandatory arbitration clauses that appear in every contract we consumers have to agree to whenever we want to get a new cell phone carrier or sign up for cable service.

Now I know that this may not exactly seem ZOMG-worthy since by a strict reading of the text the Act clearly indicates that this will only be a study, but it’s a start.  Like all potential acts of congress, they have to start somewhere and for something as radical as what this reform proposes, it’s amazing that this act has made it this far.

And of course, the Act is not without its dissenters.  When something this big is in the pipe, you’d better believe that the many of the corporations out there will be ready to fight it tooth and nail.  And not just the mandatory arbitration reform either, the Act contains a lot of changes targeted at Wall Street.

But if the bill does go through and mandatory arbitration in consumer contracts becomes a thing of the past, you can expect a lot of changes in corporate behavior.  For one thing, many legal analysts believe that the bill will encourage corporations to draft more consumer friendly terms, such as more forgiving early termination methods and fees and even giving customer service representative more leeway in meeting the needs of consumers who feel that they’ve been wronged by their contract.

Why?  Because mandatory arbitration clauses normally give consumers only one option: resolving their disputes with a company through private dispute resolution.  But if that safeguard were to be removed, well, goodbye few-hundreds-of-dollars-settlement, hello million-dollar-lawsuits.

At the very least, the removal of mandatory arbitration will be a strong deterrent that’ll make it more likely corporations everywhere will treat us consumers better and not just toss phone covers at us.