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Consumer Reports: When you agree to arbitration clauses in the fine print

Posted at 7:43 AM, Jul 14, 2022
and last updated 2022-07-14 08:43:33-04

NASHVILLE, Tenn. (WTVF/CONSUMER REPORTS) — Whether we’re buying a phone, a car, or shopping online, it seems like we’re squinting more than ever trying to read the fine print. Often in that tiny legalese is something called an arbitration clause, which can have sweeping implications on what you can and can’t do if something goes wrong.

Consumer Reports introduces us to Kathy Greiner, a woman who spent years fighting for her right to sue a company.

Greiner was a DIRECTV customer for five years until her equipment stopped working. She was sent new equipment that she says was also faulty.

"We had tried numerous things to get it to work. We had even climbed up on the roof and adjusted the dish, the DIRECTV dish," she said.

Greiner returned the new equipment and switched providers. She thought the issue was over.

"They said you’re going to have a fee of $240. They took the money out of my account. It just seemed wrong," Greiner said.

Citing early cancellation fees, DIRECTV said the two-year service commitment was in their agreement.

"I never signed anything. I never saw that anywhere," Greiner said.

She filed a class action lawsuit in the Los Angeles Superior Court saying the company failed to disclose early cancellation fees. That was in 2008.

DIRECTV asked the court to resolve the case through arbitration.

After seven years of rulings and appeals, The U.S. Supreme Court ultimately ruled in favor of DIRECTV. Consumer Reports says this has had sweeping implications for consumers.

"Arbitration deprives you of your right to a day in court to challenge any corporate wrongdoing. It leaves the consumer without a lot of recourse," said Justin Brookman with Consumer Reports.

Consumer Reports also says companies like DIRECTV may have a motive for settling disputes through arbitration.

From 2004 to 2010, DIRECTV assessed early cancellation fees to more than 700,000 California subscribers — totaling $82 million. During that same period, the company paid just $16,000 to arbitration claimants.

"They’re lining their pockets, while consumers can’t fight back effectively. It’s outrageous," Brookman said.

DIRECTV has since changed ownership, but asked by Consumer Reports to comment on Greiner's case, the company said this: "We offer multiple service options to meet customers’ preferences."

Greiner can’t say whether she ever got her money back but says her claim was resolved.

"I do feel that our hands are tied when we agree to these contracts," Greiner said.

So what can you do to protect yourself? Try to buy or use products that don’t require arbitration. Unfortunately, that means reading through the terms and agreements. Also, use social media to complain about arbitration. Some companies have actually changed their legal terms and gone back to the way it was before they required arbitration.