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What Is Binding Arbitration? |
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As an alternative to judges or courts settling disputes between consumers and businesses, binding arbitration works out a deal through an independent, third-party body. Binding arbitration may save time, money, and energy when two parties disagree over a contract, the performance of a service, or the exchange of goods. The arbitrator's decision is final and cannot be disputed or appealed. Increasingly, lenders and distributors are requiring consumers to sign binding arbitration agreements, which might lessen the load on courts, but may also erode a consumer's constitutional rights. Businesses prefer to resolve claims through binding arbitration because it is more private, avoiding possible bad publicity that could erupt in a trial. They are also not bound to certain legal requirements, such as "discovery," whereby the persons involved in the claim have access to otherwise private information. For everyone involved, a resolution will generally be offered sooner than it would take a judge or jury to hear and decide a case. It also saves money, since each party presents their evidence less formally, without necessarily needing an attorney. The controversy surrounding binding arbitration revolves around people's rights with respect to mandatory and voluntary arbitration. With mandatory arbitration, a borrower or consumer must agree to use an arbitrator, rather than the courts, to resolve any issues. This is often required as part of getting a loan financed or buying large purchases, such as a car. In voluntary arbitration, after a disagreement arises, both the consumer and the company can agree that they find it mutually beneficial to let a third party intervene. A consumer has waived their constitutional right to sue as an individual or with a class action suit when he or she signs a mandatory binding arbitration clause as part of a contract. Consumer advocates point out that many people do not know they have denied themselves that right. Consumers are also not usually aware that the independent arbitrator may have an interest in siding with a corporation for financial reasons, and may not be entirely neutral. The fee to file a claim may actually be more than hiring a lawyer, therefore some advisers suggest consumers think carefully before agreeing to this course of mediation.
Written by
S. Mithra |
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