Don’t click away your day in court: Beware e-commerce “Binding arbitration” clause

15 01 2008

Don’t click away your day in court: Beware e-commerce “Binding arbitration” clause

Posted by: in Money Ripoffs and Scams

Filed under: Ripoffs and Scams, Shopping, Fraud

Have you heard about “binding arbitration” clauses in contracts? They’re the part of the contract which says that if you’ve a dispute with the other celebration, 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 vehicle buy documents, home construction contracts, and all sorts of other contracts. And you may not even realize you’re concurring to this mandatory arbitration.

Have you ever made a buy online and failed to read the fine print? You just clicked on “I concur to the terms and conditions”? Well if you did that at Overstock.com, you’ve concurred to mandatory arbitration.
A judge recently dismissed a lawsuit filed by Shandie Deaton against Overstock.com for claimed violations of the Fair Credit Reporting Act (FCRA). She states that Overstock.com 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 Overstock.com receipts in violation of the law.

But the lawsuit was dismissed because each time a customer buys something on Overstock.com, 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 have to go one by one. No class action status.

Think this through the next time you’re making a buy 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’s 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 Overstock.com 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.