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FOR IMMEDIATE RELEASE: CONTACT: Liz Hitchcock,
PIRG (202) 546-9707
Feb. 24, 2005 Angela
Bradbery, Public Citizen (202) 588-7741

Ira Rheingold, NACA (202) 452-1989

Groups Launch Nationwide Effort to Stop Use of Binding Mandatory Arbitration
Clauses

Campaign Includes Educational Web Sites, Call for State and Federal
Legislation, Tools to Empower Consumers

WASHINGTON, D.C. - More than two dozen public interest organizations on
Thursday launched a nationwide effort to stop the corporate use of binding
mandatory arbitration (BMA) clauses, those insidious paragraphs that are
tucked in the fine print of an array of contracts and through which millions
of consumers unwittingly waive their right to access the courts.

At a press conference, the groups released a 10-point platform for action,
which includes the unveiling of two educational Web sites, a call for state
and federal legislation, and a campaign to encourage consumers to avoid
doing business with companies that use BMA clauses.

There is probably not a single adult in the United States who is not subject
to at least one binding mandatory arbitration clause - and most are subject
to many. Buried in the fine print of credit card billing inserts, health
insurance plans, employee handbooks and even standard purchase contracts,
the clauses require consumers to waive their right to go to court if a
dispute arises with the company involved in the transaction. Cases are
funneled to a costly private legal system that favors companies and operates
outside the law; arbitrators are not bound to use legal precedent or even
good sense in making their rulings, and an arbitrator's rulings can't be
appealed.

This means that homeowners ripped off by a shady mortgage broker, patients
denied medical coverage by an HMO, employees victimized by discrimination,
and consumers caught in credit card billing scams cannot take their claims
to court. The result is the undermining of consumer protection, civil rights
and other laws that level the playing field between big businesses and
individuals.

"We are starting a campaign to stop the use of binding mandatory arbitration
clauses, which Big Business is now forcing on unknowing consumers in
billions of pre-printed, take-it-or-leave-it contracts as part of its larger
push to avoid oversight and accountability for fraud and deception," said
Joan Claybrook, president of Public Citizen. "It is galling that
corporations are systematically denying individuals their right to go to
court."

"At Trial Lawyers for Public Justice, we have been repeatedly asked for
help by consumers and employees who had strong legal claims, but were being
forced into arbitration systems badly tilted in favor of corporate
defendants," said Paul Bland, staff attorney with Trial Lawyers for Public
Justice. "These persons find it hard to believe that something so unfair
could happen to them in America, but it happens to people every day. Under
our current system, the fine print of BMA provisions in corporate contracts
can and does hurt people who have been ripped off by corporate wrongdoing."

"BMA clauses have made the bad car dealerships even worse," said Remar
Sutton, president of the Consumer Task Force for Automotive Issues. "It's
ironic that car dealers themselves fought and successfully prevented BMA
clauses from being in their own agreements with auto manufacturers. From the
methods dealerships use to sell financing to the ways dealerships handle a
consumer's rebate money, BMA clauses encourage a lawless and reckless
selling attitude: 'Why do we care, if there are no consequences to our
actions?' "

Tom Greene, of Enterprise, Ala., is a former poultry farmer and a Vietnam
veteran. In 1990, Greene built a poultry farm in which he invested heavily.
When the poultry processor attempted to force binding mandatory arbitration
on him, he refused. Greene was forced out of business and suffered
substantial losses.

He described these events at the press conference noting, "Arbitration
violates the fundamental liberties our Constitution extends to us as free
citizens in this great republic. . As a soldier, a war veteran who has drawn
blood in defense of those principles, I could not sign that contract."

Also speaking was Fonza Luke, a hospital nurse technologist who repeatedly
refused to sign the binding mandatory arbitration agreement imposed by her
employer. But when Luke tried to sue the hospital for race and age
discrimination when it fired her after 32 years of service, the federal
court refused to hear her civil rights claim and instead compelled her to
arbitrate.

The groups' 10-point platform aims to highlight the widespread use of BMAs
and provide tools to empower consumers to fight BMA clauses. In it, the
groups pledge to:

Launch two new Web sites to educate consumers about BMA clauses. The first,
www.givemebackmyrights.org, explains what BMAs are, where they are found and
what they mean to consumers. The second, www.callbeforeyoubuy.com, helps
consumers purchase vehicles without being forced into a contract with a BMA
clause.
Conduct a campaign to let consumers know which companies don't use BMA
clauses.
Encourage consumers to close credit cards that have BMA clauses and call on
credit card companies to remove BMA clauses from their contracts.
Encourage homebuyers seeking mortgages to avoid lenders that use BMA
clauses.
Urge consumers to avoid auto dealers and auto financers that use BMA
clauses.
Call for auto dealers to remove BMA clauses from their contracts.
Provide bill stuffers for consumers to send with their payments to repudiate
BMA clauses.
Urge large membership organizations to insist that partners providing
services to their members, such as credit card and mutual fund companies,
remove BMA clauses from their group contracts as a condition of offering
products to their members.
Conduct a nationwide campaign promoting the passage of model state laws
limiting the use of BMA clauses.
Call for congressional hearings on BMA clauses and for legislation
prohibiting BMA.

"Arbitration was conceived as an informal, expedited process for resolving
routine disputes between businesses," said Ed Mierzwinski, consumer program
director for the U.S. Public Interest Research Group. "But when used against
consumers, arbitration becomes a tool to block consumers from exercising
their rights." Consumers often pay steep filing fees to initiate a case
(fees can run $750 or more) in addition to half of an arbitrator's hefty
hourly charge. Fees often must be deposited up front and can run into the
tens of thousands of dollars, he added.

Arbitration panels consist primarily of attorneys who represent or have
represented corporations. Because only businesses are repeat users of
arbitration, arbitrators have an incentive to rule for the business and
against the consumer. Arbitrators have a tendency to split the difference
between two parties' positions, so awards tend to be lower than those from
judges and juries. And while judges are accountable to higher courts and the
public, arbitrators are not legally accountable for errors, often are not
subject to oversight and are not required to take legal precedent into
account when rendering their decisions.

Arbitration clauses almost always prohibit class actions and often require
that hearings be held in locations inconvenient to consumers making the
claims. And in a shocking display of hypocrisy, many arbitration clauses
allow companies to take consumers to court, even though those individuals
cannot sue the companies. Finally, arbitration proceedings are kept
confidential, and no legal precedents are set to guide companies' future
behavior. Parties are allowed only limited judicial review, if any.

"Consumers Union finds ominous the growing prevalence of fine print clauses
in consumer contracts that have the effect of blocking consumers' access to
the courts," said Sally Greenburg, senior counsel for Consumers Union.
"These binding mandatory arbitration clauses are the stealth weapon of
corporations that seek to escape being held accountable in a neutral forum -
a court of law - by giving themselves the advantage of binding mandatory
arbitration - often without the consumer even knowing she or he has no right
to go to court."

Added Linda Sherry, Consumer Action's editorial director, "Consumers are
often unaware that they have agreed to binding arbitration. We suggest that
you read the fine print of all contracts and service agreements. If you find
a BMA clause, vote with your feet and walk away. No deal is worth giving up
your right to your day in court."

"Through the cynical use of BMA clauses, corporations are systematically
stripping the fundamental right of American consumers to seek justice," said
Ira Rheingold, executive director of the National Association of Consumer
Advocates. "This blatant attempt to avoid corporate accountability must be
stopped before the American marketplace is overrun with corporate fraud and
abuse that make Enron and Worldcom the rule, not the exception."

U.S. Sen. Patrick Leahy (D-Vt.) also expressed concern about the widespread
use of binding mandatory arbitration clauses.

"Contracts that trick consumers into signing away their legal rights through
binding mandatory arbitration clauses buried in the fine print are not the
fair way to do business," said Leahy, the ranking member on the Senate
Judiciary Committee who has in the past co-sponsored legislation to prohibit
these mandatory clauses in credit card holder and car dealer contracts. "It's
an abuse that is quickly spreading, and it's time to blow the whistle and
start giving consumers a break. I commend the coalition for shining a
spotlight on this important consumer issue."