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Ask the right questions before agreeing to arbitration

It's becoming more common for credit card issuers, health maintenance organizations, computer manufacturers, securities brokers, auto dealers and other businesses to include arbitration clauses in their contracts. When you sign such a contract, you give up your right to sue the company in court. Arbitration can be a less expensive, speedier method of resolving disputes, but ask lots of questions before you sign on the dotted line.

1. Find out what's involved in filing a claim. Don't be surprised to discover that the procedure is cumbersome or inconvenient. The company and the arbitration group often determine the procedures to be followed if a dispute arises.

2. Ask about specifics. Here are some key questions: What paperwork must I complete to file a claim? What role will I have in helping to choose the arbitrator? What fees will I have to pay? (Watch out: The price can become exorbitant in some cases.)

3. You still might need an attorney. Depending on how much money is at stake, it might be wise to consult with a lawyer before the arbitration date or hire one to represent you at the arbitration.

4. Know your rights. Even if you've signed away your right to sue, say, an auto dealer in court, Florida's lemon law remains in effect. That law contains provisions to help buyers who have a dispute with a car manufacturer.

5. Aim for impartiality. Retired judges, law school faculty members and the Better Business Bureau often hear cases. The BBB charges a nominal fee. But some arbitration groups receive hefty fees from companies involved in disputes.

6. Determine who will do the arbitrating. Get the name, mailing address, phone number and Web site address of the organization in writing so you can do some sleuth work.

7. Recognize potential pitfalls. Consumers can be at a disadvantage even if they have a say in choosing the arbitrator. That's because the company executives who retained the arbitration group might be able to examine the arbitrator's record of past rulings on similar cases.

8. Understand the consequences. You relinquish a key constitutional right when you sign a contract with an arbitration clause. You won't even be able to take a company to small-claims court.

9. Pause before signing a mandatory arbitration clause. Such clauses can be found in the conditions of sale for myriad products and services. For smaller purchases, it's not that big of a deal, although you should read the clause carefully. For major purchases, consider asking the company to modify the clause to fit your comfort level or waive it altogether.

10. Just say no. If the transaction involves a big-ticket purchase and you're about to have a mandatory arbitration clause forced on you, don't be afraid to take your business elsewhere.

_ Compiled by Laura T. Coffey.

Sources: Consumer Reports ( and the Better Business Bureau (