When you buy a product or service and something goes terribly wrong, you may think, 'I can always sue.' That reasoning may not always work in your favor.
Many people may be giving up their right to sue as soon as they sign on the dotted line.
And instead of a judge handling your dispute, you may be allowing another group to determine the outcome.
The used car Jon Perz bought seven years ago has hardly ever left the garage. There was an engine problem the dealer first failed and then refused to fix, and that made the car unsafe. The dealer also refused to return Perz`s original $10,000 payment. Then Perz found to his dismay he`d agreed to binding arbitration and couldn`t sue.
“I didn`t even know what an arbitration agreement was. I was really beside myself that we`ve lost our right to court,” says Perez.
Instead of being heard by a judge or jury, the dispute was sent to an arbitration firm selected by the car dealership.
“Having the company select the arbitrator can be a serious conflict of interest. And unfortunately, such arrangements can be typical in binding arbitration agreements,” says Perez.
Binding arbitration clauses are becoming a more common requirement, including for some big companies like Microsoft, Amazon, AT&T, and even services like match.com. You agree by signing a contract, clicking 'I agree,' or just by using the product or service.
“Companies say that binding arbitration can make it easier and less costly for both sides to settle disputes. But there are concerns that giving up the right to sue can deprive consumers of an important legal protection,” says Margot Gilman.
Jon Perz regrets the day he ever signed that contract. Still, just a few weeks ago, after a seven-year ordeal, the dealership was ordered by another arbitration firm to pay him 20-thousand dollars in damages.
“This is not going to happen to me again. I will go to dealer after dealer after dealer, and my first question when I walk around the lot: `Do you have an arbitration agreement?” says Perz.
Consumer Reports says if you don`t want to agree to binding arbitration, try crossing it out and requesting a new agreement.
Or if you have already signed, there might be an opt-out period.