Did you know that virtually every time you use a credit card, join a gym, buy a car or use your cell phone you are giving up your legal rights? It’s true.

So-called binding arbitration clauses have become ubiquitous in consumer contracts. This means that if you have a dispute with one of these companies, you are forced into a closed, costly and tilted process without any appeal or public record. Not only does binding arbitration have increased potential for bias against consumers, but it also contains numerous other pitfalls for consumers such as limited public accountability, higher costs for consumers, secrecy of proceedings, and loss of court procedures designed to produce an impartial and fair outcome.

At the state level, Texas legislators are limited by federal law in how they can rein in the use of binding mandatory arbitration. The Federal Arbitration Act (FAA) prevents states from banning arbitration in most circumstances. However, there is an incorrect perception that the FAA prevents states from taking any action to protect consumers. This is simply not true. For example, states may require that contracts that include binding arbitration also disclose the costs of arbitration or that arbitration service providers be subject to regulation such as having to publicly disclose information about the system.

Moreover, states have the power to ban mandatory binding arbitration in insurance contracts, as insurance is an area that states have the authority to regulate. Texas would not be alone in banning the use of arbitration in insurance contracts. Sixteen states currently ban arbitration in certain insurance contracts; of those, nine ban the use of arbitration in all insurance contracts. The insurance industry in Texas has shown time and time again its propensity for taking advantage of consumers. Getting rid of this system is one step toward leveling the playing field.

Have you been made to participate in binding arbitration? Please share your story with us.