Arbitration Study Shows Many Don't Know They Have Agreed to Arbitrate

by Jeff Sovern

Last week I posted the abstract for our study, 'Whimsy Little Contracts' with Unexpected Consequences: An Empirical Analysis of Consumer Understanding of Arbitration Agreements. I want to discuss today some of what we learned about respondent awareness of arbitration clauses in the contracts they have entered into.

As the abstract noted, we asked the respondents if they had ever entered into a contract with an arbitration clause, and then we gave them a list of companies that include arbitration clauses in their contracts, like Verizon Wireless and PayPal, and asked them if they had agreed to contracts with those companies. The abstract reports that of the 303 respondents who claimed never to have agreed to arbitrate, 264, or 87%, did indeed have at least one account subject to an arbitration clause. That works out to more than 40% of the respondents who answered both questions.  Many respondents who thought they had not agreed to arbitrate disputes had in fact entered into more than one arbitration agreement. In addition, 244 respondents said they did not know whether they had entered into an arbitration agreement. Of  those, 89% had at least one account covered by an arbitration agreement.  Putting those numbers together means that at least 74% of our respondents had unknowingly entered into at least one agreement to arbitrate.  I say "at least" because we don't actually know whether even more had agreed to arbitration clauses in contracts we didn't ask about, like credit card contracts or checking accounts. 

The comments make it even clearer that many respondents believed they had not agreed to arbitrate despite having done so.  For example, one respondent who had entered into two contracts with arbitration clauses that we know of, wrote “i wo uld[sic] never never up my right to [sue the company].”  Another commenter who had agreed to arbitrate  explained: “i [sic] am a person to read about this before signing anything, i have never seen or read anything like this i see n mostly read,very surprising, . . . .”  One respondent rather plaintively wrote “please tell me i haven’t entered into such a contract.” We can't tell him that because he had.

I'll try to post more from the study in the days to come.