Insights

Starting this September, some businesses will face additional hurdles in their efforts to resolve consumer disputes out of court. The American Arbitration Association recently announced that it will require businesses that use arbitration clauses in consumer contracts to submit the clauses for review and registration in its new Consumer Clause Registry. As of September 1, the AAA will not arbitrate claims under a given arbitration clause until it is reviewed and registered.

Arbitration clauses will be reviewed for compliance with the due process standards contained in the AAA's Consumer Due Process Protocol. The Protocol includes 15 "Principles" designed to ensure that consumers are treated fairly under a business's alternative dispute resolution program. After the AAA reviews a submitted clause, receives the required fee, and determines that it will arbitrate a consumer-related dispute under the clause, the business and its arbitration clause will be included in the publicly accessible Consumer Clause Registry. The Registry will include the name of the business, the business's address, and the arbitration clause, along with any related documents deemed necessary by the AAA.

Businesses that submit clauses for review in 2014 must pay a "review and registry fee" of $650. The fee for clauses submitted in 2015 will be $500. Businesses that choose to register their clause(s) will also be required to pay a renewal fee of $500 beginning in 2016 and annually thereafter. If a business uses different arbitration clauses in different contracts, each clause must be submitted separately for review and registration, even if the differences between the clauses are nominal. Arbitration clauses may be registered at www.adr.org/consumerclauseregistry or via email at consumerreview@adr.org.

If a business does not submit its arbitration agreement for review, and a consumer arbitration involving that business is filed with the AAA, the AAA will conduct an "expedited" review at that time. In addition to any required filing fees, the business will have to pay a review and registry fee plus an additional fee of $250 for the expedited review. The AAA will not administer consumer arbitrations if a business declines to pay the required fee.

If your business uses an arbitration agreement provided by a forms provider, you'd be justified in believing that a registration of the form by the forms provider would suffice for all businesses using that form. You'd be justified in so believing because that's a very sensible approach. Alas, however, you'd be wrong. Every business using a vendor's form must separately register the form, resulting in the AAA's collection of perhaps hundreds or thousands of review fees for reviewing and registering form language already approved and on file in the AAA's Registry.

If your business uses an arbitration clause in its consumer contracts, you should consider if it is in your best interest to submit your arbitration clause for an initial review and registration with the AAA or to wait to do so until you have an arbitration proceeding before the AAA. Even if you ultimately decide not to register your clause right away, you and your lawyer should ensure that the clause complies with the due process standards of the Protocol.

David Hicks is an associate in the Tennessee office of Hudson Cook, LLP. He can be reached at 423-490-7565 or by email at dhicks@hudco.com.