Worthington Law Group
Injury Law Report

A lawsuit is how most legal disputes are settled. But due to the explosion of forced arbitration, the option of a lawsuit is being made increasingly unavailable to consumers.

In arbitration, a case is decided by an arbitrator instead of by a judge or jury. Arbitration has been around for years and has long been used by business because it can be quicker than a trial and is confidential.

In the past 15 years or so, more and more companies, including banks, cell phone carriers, and brokerage, homebuilder, and credit card companies, have put arbitration clauses in their contracts. Settling differences by informed negotiations between sophisticated parties to a contract is now a “take it or leave it” non-option for the majority of Americans.

Arbitration almost always turns out bad for consumers. The fees to file an arbitration case are high, and claimants must pay the arbitrator, who can cost hundreds of dollars per hour. Arbitration agreements frequently limit available remedies and offer no right to appeal. Finally, many arbitrators take the side of business in any dispute: A recent study reveals that one large arbitration organization sided with credit card companies 94% of the time.

Not only does arbitration not favor the consumer, but it is also hard to avoid. Many companies will not let consumers opt out of arbitration clauses. Those that do often bury the requirements in the fine print, or set impossible deadlines, or otherwise make carrying out the requirements difficult. The law is also very friendly to arbitration: The Supreme Court has ruled time and again that the Federal Arbitration Act is to be interpreted broadly in favor of arbitration. As it turns out most states will enforce arbitration agreements in almost every case.

None of this is good for consumers. Many people cannot bring a claim because they cannot afford arbitration. Those who do bring claims often get less then they should or nothing at all.

Calls are increasing for limitations on arbitration agreements. Some want to limit the kinds of claims that can be arbitrated. Others want to refuse to force arbitration of claims worth less than a certain amount. Still others want to completely ban mandatory arbitration for consumers. These calls for reform have run head on into the business lobby, which knows that ending arbitration will cost them money.

By now, most people are familiar with the threat of identity theft and how the thieves might use your stolen identity. This includes using your personal information to charge goods and services on a new bogus credit card.

There are the usual preventive measures you can take, such as not revealing personal information, using passwords, and shredding financial documents you no longer need. You can also get regular credit reports from the three major credit bureaus, Equifax, Experian, and TransUnion, and/or you can sign up for a credit monitoring service. These latter actions certainly have some value, but they may go only so far as to help you discover that it is too late rather than help you prevent the theft in the first place. Another theft prevention approach that may be less familiar to most consumers is the credit freeze. This is sometimes called a “security freeze”. Although the term sounds as if your credit is frozen, that is not the case. When properly used a credit freeze can give you the comfort of some additional financial security and leave potential thieves out in the cold.

You can put a credit freeze into place by notifying the credit bureaus, providing certain personal information, and paying what should be a modest fee. When the freeze is in place, it prevents all potential creditors from seeing your credit report and credit score unless you permanently or temporarily lift the freeze. Potential creditors considering a thief's application using your information will not be able to check your credit report or score while the freeze is on. The creditor will not be able to extend credit and this will prevent the new bogus account from being created.

Credit freezes are not a fail safe wall of protection against identity theft, but they do give you another line of defense. They also do not entail significant inconvenience or cost. Even with a freeze in place, you can still use any of your existing sources of credit. A credit freeze especially makes sense if you have no plans to apply for new credit any time soon. If you do wish to do so, for another reasonable fee you can lift the freeze temporarily for up to 30 days. During that time credit checks can be made in the usual manner by your potential creditors.