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Monday, October 12, 2015

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Chanson de Roland

The proliferation of arbitration clauses in consumer contracts is another instance of the failure of our courts in either going too far to cater to the interests of a dominant special interests group, here big business, or not going far enough to protect the constitutional rights of individuals or classes of persons. The courts, both federal and state should have struck down consumer arbitration clauses long ago. The patent illegality of consumer arbitration clauses for nearly every instance of consumer services rests on two doctrines: They are contracts of adhesion, and they shock the conscious, if one has any conscious to shock.

The law prohibits contracts of adhesion because there is no fair bargaining, because there is no alternative to the contract in the market place, and the party is forced to accept the contract because the services or goods being offered are essential. Those conditions are certainly true for the vast majority of consumer financial services, when it comes to arbitration clauses. There is almost no bank, brokerage, credit card company, or other financial firm and none that I am aware of that offers its services without an arbitration clause, except in the rare instant were the law presently prohibits such clauses. So the consumer who seeks the range of financial services that are necessary for modern life has no choice but to accept an arbitration clause to get those services or do without those services and, thus, abandon modern life. Therefore, no bargaining is possible, because the consumer must have the services, and there is no alternative in the market where he can get those services without an arbitration clause. That is a classic instance of a contract of adhesion, which lawyers are taught that the law should not countenance as an enforceable arbitration provision because there was no fair bargaining but impermissible coercion based on necessity and the absence of any alternative.

The second problem with most arbitration clauses, even if we ignore that they are contracts of adhesion, is that they should shock the conscious of any court in that they require of the typical consumer procedures and/or expenses that he has neither the skill or resources to satisfy, while his adversary, the financial firm, easily has the skill and resources to satisfy those requirements, so that the process of resolving disputes through an arbitration clause is manifestly unfair. Arbitration clauses are further unfair in that they deprive the consumer of rights, powers, and remedies that would be available in a court and which are required or at least advisable for ensuring that the arbitration process will be a fair process that produces a just result. Then, there is the fact that the arbitrators are often biased in favor of the financial industry in that their profession, careers, and/or compensation depends or have been made in that industry. Taken together, these burdens of unfair procedural rules; unaffordable expenses; the lost of rights, remedies, and methods of discovery that are available in a court, and/or the often at least psychological bias and/or conflicts of interests of the arbitrators, the conscious of any court of justice would be shock, find that in most instances, where the forgoing facts are present, the process is grossly unfair and, thus, unjust, and therefore, the arbitration clause would be void ab intio as a matter of public policy and as contrary to the disposition of any court of justice to enforce such consumer arbitration clauses.

The foregoing is what textbook, black letter law requires. That our courts and particularly the U.S. Supreme Court have held to the contrary is a black day for American jurisprudence. It is also a tragic thing that Richard Cordray, a distinguish lawyer who is the Director of the Consumer Financial Protection Bureau (CFPB), can't simply state that consumer arbitration clauses are henceforth void, because they are contracts of adhesion and because they are so grossly unfair as to violate public policy, but must instead vitate those sound and venerable legal principles, because our corrupt political system of both Democrats and Republicans, but much, much more the Republicans, will do everything that it can to defeat the CFPB's instant effort to outlaw the unfairness of consumer arbitration clauses, including destroying the CFPB as an effective agency to protect consumers in financial transactions. So, instead of boldly giving full vitality to the the foregoing venerable legal principles, Director Cordray must water them down in the hope of getting even a little done to protect consumers.

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