Reading the Fine Print

The jury is out

"I'll see you in court." Or maybe not. "Arbitration clauses" require you to waive your right to a court trial or class action in favor of binding arbitration. Here's an example from Citibank's credit card agreement:

"Arbitration replaces the right to go to court, including the right to a jury and the right to participate in a class action or similar proceeding .... Either you or we may, without the other's consent, elect mandatory, binding arbitration for any claim, dispute, or controversy between you and us."

At first glance the wording may look fair. But a closer read reveals that the bank can unilaterally force you into arbitration rather than a jury trial. And, if you don't prevail, you could be on the hook for all its expenses (attorneys, expert witnesses and fees). Ouch!

The Fix: Even though court trial and class action lawsuits have been taken off the table, in many jurisdictions you may still have the ability to pursue your case in small claims court, where you can't be helped by an attorney and cases are typically limited to less than $10,000. The little guy really can win here sometimes — just last month, an AT&T customer won a small claims case challenging the telephone giant's billing practices. In February, automaker Honda ended up on the losing side of a small claims verdict regarding lower-than-expected hybrid gas mileage.

The impossible trial period

The lure of a "free trial" period is that you get the chance to test out a product or service before actually risking your hard-earned cash. Some agreements hold out the promise of a trial period, but fall way short in practice. Take a look at this language from alarm company ADT:

"The customer may cancel this transaction at any time prior to midnight of the third business day."

You're given just three business days to learn, evaluate and make a final decision on whether a complex security system will actually perform as promised. If you don't, even after paying for installation, you're on the hook for $1,200 to $1,600 — 75 percent of the entire three-year contract price. (And talk about nerve — the agreement also frees them from responding to alarms during a "familiarization period" that lasts seven days.)

The Fix: Pay attention to the full contract price rather than just the monthly payment. Service providers often advertise their products based on monthly cost, even when your signature actually locks you into a four-figure, multiyear agreement. To make sure you're getting what you were promised, accept nothing less than a 30-day trial on any long-term service. You may have to eat the installation cost if you quit, but that's minor compared with three years of payments for a service that doesn't work for you.

Ron Burley is the author of Unscrewed: The Consumer's Guide to Getting What You Paid For.

Also of interest: Is a service contract a waste of money?