AUGUSTA, MAINE - Buried within the fine print of many consumer contracts for credit cards, home-building contracts and car purchases are clauses that stack the deck against ordinary Americans and force consumers to give up their rights before a dispute even occurs.  This is called “pre-dispute Mandatory Binding Arbitration.”

Rep. Sean Flaherty (D-Scarborough) knows all too well the dangers that Mandatory Binding Arbitration Clauses pose to consumers.  In 2007, Flaherty, worked in Washington, DC to support federal legislation that would ban the use of such clauses in contracts nationwide.

“I was part of my job to research cases and prepare people who had been victimized by these clauses to testify before Congress,” Flaherty said, “I met some incredible people who signed contracts for a new home, a new family car, or even employment without even realizing that if a problem was to arise, they would have no recourse whatsoever.  Many of these people lost thousands of dollars, some lost their small businesses and life savings.”

What is also concerning to Flaherty is the high costs of arbitration.  When consumers try to hold businesses accountable through arbitration, they must pay costly filing fees– often more than $750 just to initiate a case.  Even worse, these fees do not cover the arbitrator’s hourly charges, generally in the range of $200 to $300 per hour.  The fees must be paid in advance, and often add up to tens of thousands of dollars.
“This may be cheaper for large corporations who don’t have to pay for their expensive legal teams,” Flaherty remarked, “But it is certainly not cheaper for the average Mainer.”

Courts can provide a range of remedies not available to a claimant in arbitration.  For example, a court order can compel the offending party to change their practices, preventing future harm to consumers.  Mandatory Binding Arbitration has no legal standing so companies who are employing dangerous practices or selling dangerous products will simply continue to do so even if the arbitrator rules against them in arbitration.

Although the practice of using Mandatory Binding Arbitration clauses in contracts is most prevalent in other states, Flaherty fears that it will soon come to Maine.  “These clauses are already standard when you get a new credit card or cell phone, for example,” Flaherty noted,  “The folks who I helped to testify before Congress and their stories will break your heart, I don’t want that to happen to any Mainers.”

The bill, LD 1256, will be heard in the Judiciary Committee Thursday April 30th.

Sean Flaherty, a Scarborough native, represents House District 127, which includes half of Scarborough. He can be reached through his Web site www.SeanFlaherty.org, e-mail at RepSean.Flaherty@legislature.maine.gov, by phone at 450-4188, or US Mail to PO Box 6998 Scarborough, ME 04070.

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