Arlington, VA, March 26, 1998 -- Voluntary arbitration is quite often a very effective dispute remedy for businesses and consumers. However, dispute settlement procedures that limit a consumer's access to the courts should never be forced on anybody. That's the message from the Council of Better Business Bureaus, Inc. (CBBB) which today announced its policy regarding pre-dispute, binding arbitration clauses in consumer contracts. Under the policy, adopted by a vote of the CBBB membership, the nation's 135 Better Business Bureaus will only agree to arbitrate such consumer-business disputes when the contract gives fair notice to the consumer of the consequences of agreeing to arbitration and the customer formally acknowledges acceptance of the arbitration clause.
Specifically, the new BBB policy sets a standard, by providing that any contract for the sale of a consumer product or service that requires BBB arbitration to resolve disputes must clearly and conspicuously:
- Identify the types of disputes that are covered by the arbitration clause;
- Identify the arbitration forum and provide a telephone number to contact for additional information about the forum;
- Disclose the nature and amount of any fees consumers may have to pay in connection with the filing or administration of their case; Advise consumers that, by signing the arbitration clause, they will not be able to go to court for that dispute;
- Advise consumers if strict application of law, rather than principles of fairness or equity, will be the basis for an arbitrator's decision; and,
- Require that the consumer separately sign the arbitration clause that must include both a signature line for the consumer to acknowledge that he or she agrees to the arbitration process and waives the right to sue in court over the dispute and a statement advising the consumer that he or she does not have to sign the arbitration clause, and that the consumer will not be committed by the clause unless he or she affirmatively acknowledges acceptance of the arbitration process.
According to Charles Underhill, CBBB's senior vice president responsible for BBB dispute settlement programs, so-called "pre-dispute, binding arbitration clauses" which are agreements to arbitrate that are inserted in sales contracts, have been used historically in contracts involving two business entities or in collective bargaining, where both sides are represented by sophisticated negotiators. In more recent years, however, as the benefits of alternative out-of-court procedures have become more widely recognized, these clauses are appearing more frequently in consumer product and service contracts.
Underhill explained that the BBB believes arbitration often is a very effective remedy for both consumers and businesses. The BBB also believes it is essential that the parties enter these arrangements voluntarily, with a clear understanding of what will be subject to the arbitration agreement, what it will cost, and what rights are given up in return for the opportunity to arbitrate.
Underhill noted that the obligation to arbitrate has frequently been buried in the contract, or very poorly drafted. As a result, he said, “in these cases it is difficult to say that the consumer's agreement to arbitrate is voluntary. Indeed, it is often a complete surprise to consumers when a dispute later arises and they discover the lengthy documents they signed included one of these clauses."
Arbitration has long been encouraged by the BBB as an effective method of resolving marketplace disputes. It still is. However, when businesses use a binding, pre-dispute arbitration clause and name the Better Business Bureau as a provider, they will be required to follow the BBB policy for fair disclosure to consumers and give the BBB notice when they draft such contract provisions.
"We hope other consumer dispute resolution providers will follow our lead," Underhill said.