Associate Professor Richard H. Frankel testified at a U.S. House of Representatives Committee on the Judiciary subcommittee hearing regarding reform of the federal Arbitration Act May 5.

Frankel said the federal law has far-reaching consequences for consumers, who often unwittingly give up their rights to take businesses to court when signing loan applications and service contracts that contain arbitration clauses.

While the law has existed since the 1920s, “there’s been an explosion of arbitration clauses in the last 10 years,” Frankel said, explaining that credit card, cell phone, auto loan, cable television and computer contracts commonly contain language that mandates arbitration as a means to resolve disputes.

Arbitration gives the companies much control over the process, Frankel said, since they write the provisions for the contracts and can draft them in ways that are favorable to them.

Consumers who fall behind in payments can find themselves in deeper financial trouble, Frankel added. If they fail to recognize the significance of summonses from arbitration firms and miss the hearings, they then face fines and additional costs.

Frankel was invited by Judiciary Committee Chairman John Conyers of Michigan to testify before the Subcommittee on Commercial and Administrative Law for a hearing on the credit card industry’s use of the arbitration law.

Congress could play an important role in protecting consumers, Frankel said, since the Supreme Court has interpreted current federal law to specifically bar states from enacting constraints on arbitration.