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Let’s be clear that I find the practice abhorrent to my sense of fairness and justice. In a perfect world, free from the outsized power of corporations to influence the rules of society, there would be no arbitration and every consumer dispute would be resolved quickly and fairly in a court of law. But, we do not live in a perfect world, we live in a very imperfect world and the best we can do is play the cards we’ve been dealt in the most beneficial and advantageous way we can. So how do we take advantage of arbitration and use it to our benefit?

To preserve the system, many corporations have agreed in their arbitration provisions to pay the costs. For this reason, filing an arbitration often costs the consumer nothing out-of-pocket.

This is where the consumer can take advantage of the process – generally it cost a couple of hundred dollar to file an arbitration. Soon after the arbitration is filed, an arbitrator is assigned. Once the arbitrator is assigned, the costs of arbitration start to accrue. Before the case even goes to a hearing, the corporation’s arbitration bill is already into four figures. If the corporation hires an outside attorney, the costs go even higher.

According to the American Arbitration Association Consumer Rules:
“Under AAA Consumer Arbitration Rules, after the consumer pays a $200 filing fee, the [corporation] must pay a $1500 filing fee, a $500 hearing fee, and $1500 arbitrator compensation per hearing day. The [corporation] will even have to pay the consumer’s $200 fee if the arbitration agreement provides the company will pay all costs.”

If your dispute is for a relatively small amount of money (perhaps under a couple thousand dollars), the incentive is for the corporation to settle quickly before the costs go even higher.

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