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CFPB: Forced Arbitration Bad For Consumers; Elderly Advocates Urge Policy Change

Anyone who has ever assisted an elderly relative likely endured the process of signing or reviewing stacks of admission paperwork. And most probably, somewhere in that stack, was an arbitration agreement.writing

These agreements have become standard in many areas of commerce, and nursing home care is apparently no exception. In fact, it’s the norm.

Recently, the Consumer Financial Protection Bureau issued an Arbitration Study, reporting to Congress on the issue of mandatory arbitration agreements. Although the research focused primarily on mandatory arbitration agreements for things like checking accounts, credit cards, payday loans, cell phone contracts and student loans, the bottom line was that arbitration clauses – which require consumers settle disputes before an arbitrator, rather than a judge in court – were detrimental to consumers.

The National Consumer Voice, an advocacy group for better quality of long-term care, applauded the research, and took the opportunity to highlight the fact that residents of long-term care facilities are often victims of forced arbitration agreements, which essentially require them to sign away their right to seek justice in court for wrongdoing in exchange for having affordable care and shelter for an aging loved one.

Forced arbitration agreements during the admission process put the long-term care facility at a distinct advantage. The legal language, which carries significant consequences in the event of nursing home abuse, neglect or negligence, is often buried in an enormous pile of papers to be signed. This is on top of all the other stresses that go along with placing a loved one in a long-term care facility. Consumers often report feeling coerced, as in it’s a “take-it-or-leave-it” situation; either they sign the paperwork or they risk being denied admission.

The CFPB reported arbitration is typically preferred by companies because it tends to reduce the cost of litigation. But it has several distinct disadvantages for consumers.

Consumers tend to receive significantly less in arbitration than they do when cases go before a jury. And that’s if they win, as arbitration cases are more likely than those that go to court to be decided in favor of the corporation.

Finally, as it relates to nursing homes, arbitration agreements often require the outcome to be private. That means there is no public discovery, no public understanding of how the nursing home may have wronged its patients – and no warning to those who may be considering that facility for care of their own loved one. It keeps people in the dark, and reduces incentive for nursing homes with poor practices and policies to change.

Companies have argued that more class actions lawsuits – or just more lawsuits in general – leads to higher costs for consumers. However, the CFPB found no evidence that an increase of arbitration clauses led to a decrease in prices for consumers.

The study, which was mandated under the Dodd-Frank Act, is the first step in what consumer advocates hope will be abolishing mandatory arbitration clauses.

Specifically as it relates to long-term care facilities, advocates at Consumer Voice urge Congress to re-introduce and pass the Arbitration Fairness Act, which essentially holds that arbitration agreements won’t be valid or enforceable where made mandatory, or where they pertain to mployment, consumer, antitrust or civil rights of others.

Freeman Injury Law — 1-800-561-7777 for a free appointment to discuss your rights.

Additional Resources:

CFPB Says Mandatory Arbitration is Bad for Consumers, March 10, 2015, By Taylor Tepper, TIME

More Blog Entries:

Wrongful Death Lawsuit Accuses Nursing Home of Neglect, March 22, 2015, Boca Raton Nursing Home Abuse Lawyer Blog

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