Staff Writer

Mandatory arbitration settlements appear in the fine print of many credit, employer or consumer contracts.

A new law initially sponsored by Maine Rep. Sean Flaherty (D-Scarborough) and signed by Gov. John Baldacci on Wednesday will enlarge the fine print by requiring companies and individuals providing arbitration services in Maine to post results of their decisions on a Web site. Basic consumer information, including potential expenses and whether an attorney may be present at a hearing, also must be posted.

Flaherty said arbitration agreements, which are useful in averting court cases, are found in real estate and car purchasing contracts, employment contracts, cell phone agreements and the licensing agreements needed to download software.

A 2009 report by the Maine Bureau of Consumer Credit Protection showed eight individual arbitration providers from Maine, New Hampshire and Vermont and three national firms helped decide 2,500 cases in Maine during 2008.

William Lund, superintendent of the bureau, said all the cases involved credit card debt and settlements totaling about $5 million were awarded while creditors had sought a total of $20 million in judgments.

Lund said the vast majority of cases are settled in favor of the creditor, often because the consumer ignores the notice to show up for a hearing. The arbitration agreements usually call for the creditor to pay expenses of the arbitration hearing, Lund said. Details of hearings are kept confidential, and only the results will be posted on a Web site when the law is enacted.

Lund said results of civil court cases to collect debts mirror the number of arbitration cases decided in favor of creditors. The process of providing arbitration was called into question last July when Minnesota Attorney General Lori Swanson filed suit on behalf of consumers against Minneapolis-based National Arbitration Forum.

The firm, listed by Lund in his report as doing business in Maine, falsely claimed it was impartial after it worked with credit card companies to include arbitration clauses in credit agreements and then arbitrate disputed cases, Swanson said in a press release.

National Arbitration Forum agreed to stop consumer arbitration cases days after the suit was filed, according to Swanson. She said she would like to see Congress ban the mandatory arbitration agreements.

While it may prevent litigation overall, the arbitration process has been costly for Tim Cason, a Bowdoinham contractor who expects to have his suit against Chase Bank heard Tuesday in Sagadahoc County Superior Court.

Cason estimated a dispute over a $22,000 credit card balance has cost him an additional $30,000 in legal fees. He said the bank did not respond to his claim before taking the case to arbitration, which he said was not stipulated in his consumer agreement.

Although he received a notice to appear at a hearing, he did not go because he had not agreed to the process when he got the credit card, he said.

Flaherty said he heard similar tales of conflicts caused by fine print agreements when he worked at the Washington, D.C.-based American Association of Justice. He said he made reforming the process a priority when he was elected to his first term in House District 127.

A disputed credit case that goes to court may be dismissed if the consumer has signed a contract that mandates arbitration. Federal law prohibits banning the arbitration clauses altogether, Flaherty said.

Flaherty said the intent of his bill, which Lund helped develop and revise, is to provide basic information that may help a consumer decide who will hear the arbitration case. Each side is generally allowed to pick arbitrators for the panel that hears a case.

“We found middle ground on a good and fair law,” Flaherty said. His intent, he said, is to ensure consumers are aware what the process entails and how arbitrators may be inclined to decide, without affecting rights of businesses to use arbitration.

 “I did not expect it to go anywhere,” he said. “But the deck should not be stacked against either party.”

Staff writer David Harry can be reached at 282-4337, ext. 219