Dealing with the United States legal system is no small task when it comes to a civil dispute between you and a corporation. You have to find representation which can cost thousands of dollars, find all the appropriate evidence, come up with a viable case, call in witnesses, get a court date, and the like. The corporation you have a dispute with has all the same burdens, and since most companies want to make money, it makes sense they would want to find a way to resolve those disputes for less money. They have done this by creating an arbitration system which allows companies and consumers to resolve issues outside of the US legal system. This seems as if it would be a great idea, unfortunately most company’s arbitration routes are stacked against the consumer and the consumer loses in almost all cases.

Many companies are forcing all of their customers to solve disputes through an arbitration organization, such as the American Arbitration Association or the National Arbitration Forum. They contend that their customers are agreeing to work through these types of organizations whenever they sign their customer agreement, which they are. However, it’s very difficult for consumers to have any idea of how fair any dispute resolution system will be if they have never had a dispute with that company before.

Consumers naturally assume that if there’s a real problem, they would be able to get a lawyer and hash out the issue in court. Because of mandatory arbitration, this is no longer the case. Consumers are forced to settle their disputes with companies through an arbitration association and don’t even have the option of going through the US legal system.

Arbitration in itself is not a bad thing. It’s much less expensive of a process than going through the court system and if more people to make use of arbitration, it would save a substantial amount of time in our clogged court system and provide consumers a lot of additional choice in how they resolve disputes. Unfortunately companies have been abusing arbitration systems and forcing consumers to settle their dispute through arbitration organizations that the company hand selects and pays for their services. The system is stacked against consumers and they have little recourse.

This has become a major problem in the brokerage industry. Full commissioned brokers sometimes sign consumers up for investments that are wholly inappropriate for them and their customers want recourse. They have to go through the arbitration and lose more often than not. A recent study showed that if you have to deal with Morgan Stanley, Smith Barney, or Merril Lynch’s arbitration systems, consumers will get just 10% of their money back.

Congress is addressing the issue and looking at a bill which will outlaw mandatory arbitration. If consumers had the choice whether or not to enter arbitration, the companies would then have a real incentive to make the process fairer. Until then, consumers are facing an uphill battle when it comes to resolving disputes with companies through arbitration organizations