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Mandatory Arbitration Provisions Are Coming Under Attack


Posted on Oct 12, 2009

Many nursing homes require residents to submit all disputes to arbitration.  When the resident seeks admission to the facility, the nursing home has the individual sign a paper in which the would-be resident must give up the right to file a lawsuit and is required to submit any claim to an arbitration proceeding. The same is also true of many credit card companies.  Because the credit card companies pay and hire the arbitrators, decisions have overwhelmingly favored the credit card and finance companies. One arbitration company, The National Arbitration Form, was found to have ruled in favor of the debt-collection agencies that hired it in 94% of the arbitration decisions.  As a result, state officials in Minnesota accused it of deceptive business practices and serving as a pawn for the business interests.

These abuses have led Congress to consider The Arbitration Fairness Act of 2009, laws that would prohibit companies from forcing prospetive customers to waive their legal rights and agree to arbitration.  This bill is under consideration and there is heavy pressure to get it passed this year.

Arbitration works best in commercial settings where both parties voluntarily agree to arbitration and both concur on the choice of the arbitrator.  This is not the case in credit card applications or nursing home admissions documents where the individual has no choice but to agree to mandatory arbitration or not enter into the contract and be admitted into the facility.

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