Forced Arbitration Explained

Forced arbitration is a clause in an agreement that requires you to resolve disputes with a company through private arbitration instead of going to court. It's "forced" because you usually can't use the service unless you accept it. It often comes paired with a waiver that blocks you from joining a class action lawsuit.

What arbitration means

In arbitration, a private decision-maker (an arbitrator) hears both sides and issues a binding decision. Unlike a court case, arbitration is typically closed to the public, follows no public precedent, and offers limited ability to appeal. For many consumers, it's harder to win and harder to afford than a traditional lawsuit.

Why a class action waiver matters

A class action lets many people with the same complaint sue together. When an agreement waives your right to participate in a class action, each person must bring their claim individually, which is often impractical for small-dollar disputes. This effectively removes the financial pressure that large groups can place on a company.

Example

An app's terms state: "Any dispute arising from these terms will be resolved by binding arbitration, and you waive your right to participate in a class action." Termcon flags this as a high-risk forced arbitration clause because it removes both your day in court and the ability to join others.

Why this matters

If a company overcharges millions of users by a few dollars each, a class action can hold it accountable. Forced arbitration with a class waiver can make that economically impossible, leaving individuals with little practical recourse.

What Termcon checks

Termcon looks for arbitration requirements and class action waivers, then rates how broadly they apply, from absent to broad and sweeping.