Making Sense of Airbnb’s Binding Arbitration Terms

On May 19, 2016, Airbnb demanded all of its U.S. users to agree to its new Airbnb Terms of Service.

If you click “I disagree” instead of “I agree,” you can no longer have access to Airbnb.


So, if you want to use the tool that disrupted the hotel industry, be aware of some significant changes to your rights and protections.

1. No More Airbnb Host Protection Insurance

Airbnb no longer offers its Airbnb Host Protection Insurance Plan of $1 million in coverage.

Whether you are a host or a guest, you now need your own insurance if you want to be insured against damage claims.  Scope of coverage will be subject to your home or renter’s insurer’s policy and exclusions.

2. No Access To Courts, Only Binding Arbitration

If you have a dispute with Airbnb, you must use arbitration with the American Arbitration Association (AAA) to try to resolve your claim.

AAA for arbitration is becoming somewhat like what AAA (American Automobile Association) roadside service is for cars, but for businesses.  It is a form of insurance against a headache – here, rather than avoiding being left stranded with a flat tire, it is avoiding going to court or defending against class action lawsuits.

Arbitration is an expedited dispute resolution procedure where a neutral appointed lawyer or retired judge review submitted evidence and make a binding decision that will be court-enforced.

AAA for arbitration was initially a place for business to business disputes, but over the past decade, businesses are starting to demands consumers use the process, as well.

If you, as the host or guest, have a claim against Airbnb, you will have to send in a notice of demand for arbitration to Airbnb and AAA.  There is a $200 filing fee, which Airbnb says it will cover in certain circumstances.

Arbitration is intended to be a simple, quick and hopefully fair alternative to the court procedure.  Here is how Airbnb approaches AAA arbitration:

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DropBox Arbitration and What It Means For You

Meeting of the minds online in terms and conditions, dropbox arbitrationHow many relationships are you in? Probably more than you can keep track of. Don’t worry! I am talking about the consumer-business relationship!  Yes, you are in countless relationships with businesses.

Every time a consumer engages in a transaction with a business (e.g., clicks on a website, buys an iPad, attends a Mariner’s baseball game, etc.), there is a relationship.  With a relationship, there are expectations, and promises.  For example: You will not run onto the baseball field at a Mariner’s game, you will not disrupt the other patrons’ enjoyment, in exchange for the Mariner’s agreeing to play the game and offer you a seat and entertainment.

Promises and expectations are set with, at least some, meeting of the minds.  The definitive legal term, “meeting of Click and Accept Terms and Conditionsthe minds” means you understood the expectations from the relationship.

The issue in the mobile Internet age of click and accept, is — was there indeed a meeting of the minds to the corporation’s “Terms and Conditions”?  Most courts say, yes.  As such, you agreed to the arbitration clause within the terms and conditions.  Say what?  Let’s take a look at one such arbitration clause.  Let’s look at the popular cloud, Dropbox and its arbitration clause.

Dropbox Arbitration – where is it and is it so bad?

The Dropbox Arbitration clause is located in the Terms of Service page.  To get there from the Dropbox homepage, scroll to the bottom of the page and click on the hyperlink “Privacy.”  Make sure you are then on the Terms of Service page.  Scroll down a bit until you arrive to the subheadinDropbox Arbitrationg “Resolving Disputes.” You will find:

Resolving Disputes

Let’s Try To Sort Things Out First. We want to address your concerns without needing a formal legal case. Before filing a claim against Dropbox, you agree to try to resolve the dispute informally by contacting We’ll try to resolve the dispute informally by contacting you via email. If a dispute is not resolved within 15 days of submission, you or Dropbox may bring a formal proceeding.

OK, not bad.  Dropbox is open to resolving the dispute.  I bolded and underscored their email for you above, to make it clear where you can try to reach a human at Dropbox.  A human who may care to try to fairly resolve your dispute.  However, if that does not work out, Dropbox says:

We Both Agree To Arbitrate. You and Dropbox agree to resolve any claims relating to these Terms or the Services through final and binding arbitration, except as set forth under Exceptions to Agreement to Arbitrate below.

Hold on!  You may be thinking – Binding?  Final?  Who said so?  Well, your gut reaction is fair. And, if you are so inclined, you can opt-out, Dropbox says:

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Student Arbitration Illegal Under Proposed Law

Student arbitration is a way that many private, for-profit colleges want any and all disputes be resolved between the college and students.  The student arbitration clause is found in enrollment agreements.  The clause is usually buried among the pages of single-spaced text, and the pressure of an enrollment advisor to get the documents signed.  Who has time to read all the fine-print?  Especially eager soon-to-be college students?  College Enrollment Agreements and Arbitration Clauses

Student arbitration silences students

Reports indicate that these student enrollment agreements are very unfriendly to students. For example, national, for-profit Corinthian Colleges was preying on potential students, by encouraging them to take out Title IV federal student loans to attend their sham colleges.  After some investigations and lawsuits by the federal government (because the students were bound to arbitration, only), Corinthian reached a deal with the Department of Education, and shutdown and filed for bankruptcy in April 2015.  Now 78,000 former Corinthian students are reeling for recourse, such as loan forgiveness.

In response to this adverse effect of student arbitration clauses, a couple Congresspeople  have proposed a federal bill that would prohibit colleges from requiring student arbitration of any and all future disputes.

Class Act of 2015

The proposed law is the Court Legal Access & Student Support (CLASS) Act.

CLASS Act, a nice acronym for education, and phrase for the objective of the proposed law: for-profit colleges and other education institutions conducting business with integrity and respect for the constitutional rights of its constituents.  Namely, respect the students’ rights to a jury trial to resolve any dispute concerning their federally protected class.

Federal Senate Bill 1122: Court Legal Access and Student Support (CLASS) Act will add some limiting language to the Higher Education Act of 1965:

‘‘The institution will not require any student to agree to, and will not enforce, any limitation or restriction (including a limitation or restriction on any available choice of applicable law, a jury trial, or venue) on the ability of a student to pursue a claim, individually or with others, against an institution in court.’’

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Highlights of CFPB Arbitration Report 2015

CFPB Arbitration ReportThe federal Consumer Financial Protection Bureau issued a CFPB Arbitration Report for 2015.  The report shows where arbitration clauses are found and their impact on consumers.

CFPB Arbitration Report Findings

  • 99% of payday loan lenders (in CA and TX , only) have arbitration clauses…
  • 92% of prepaid cards
  • 88% of mobile providers
  • 86% of private student loans
  • 53% of credit cards
  • 44% of checking accounts

Arbitration is very likely in your contract.

So what?  Is arbitration bad?

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Harassing Collection Agency Found Liable for Big Damages

being harassed by a debt collection agency?

The Fair Debt Collection Practice Act (FDCPA) made headlines this week as a jury in Missouri awarded one woman $251,000 in FDCPA damages for being wrongfully pursued by Portfolio Recovery Associates, a debt collection agency.  The extreme of this award is that the amount pursued was just over $1,000 for a past due credit card bill.

The counter extreme is that the debt collection agency was pursuing the claim in a harassing manner against the wrong person, Maria Guadalupe Mejia Alcantara, for 15 months.  Ms. Alcantara, in Kansas City, Missouri, was not the debtor — rather, a man in Kansas City, Kansas was the debtor.

The jury awarded an additional $82.9 million as punitive damages for Portfolio’s harassing prosecution of the claim.

Get the harassing collection agency to owe YOU.

The FDCPA provides for up to $1,000 per violation of the Act plus attorney fees and costs.  However, there are some general damages claims a debtor can make, such as emotional distress and pain and suffering, which are claims based in state law, that may not have a statutory limit.  Punitive damages are not available under the FDCPA, but are available in certain states (not in WA).

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Consumer Arbitration – Only Option With Some Banks, CFPB Finds. Can Arbitration Help The Consumer?

Earlier this year the federal government investigated consumer arbitration and banks.   The Consumer Financial Protection Bureau (CFPB) issued a lenghty report of its investigation between 2010-2012, concluding that many consumers do not know they are subject to arbitration or understand the process.  So, this post will briefly discuss arbitration and how it may help the consumer.  For more details about the CFPB report, in easy-to-understand language, read this post.

Imagine your bank pissed you off (may not be to hard for some of us to imagine this).  Let’s say your bank charged you a fee or interest rate you did not agree to.  You feel wronged.  Rightfully so.  And you want your money back.  Even if it is “just” $10; it is your $10.  Maybe it is an even larger sum, $1,000.  How do you get a bank to admit to doing something illegal and reimbursing you the money owed and paying your legal costs?

Class Actions – A Thing of the Past

Class actions used to be the go-to approach.  Many people, same problem, one lawyer or legal team, and a payout in a few hundred months.  But now, class actions are being written into history, by the up-and-coming mandatory, private arbitration.

Consumer Arbitration For Bank Customers

consumer arbitration, consumer arbitration in banks, banks and consumer arbitration

Consumer Arbitration Hearing Example

Arbitration is a “mini trial,” but with no courthouse, judge, or jury.  Arbitration has some rules of evidence, lawyers can participate, and a third party appointed by the disputing parties listens to the case and makes a decision.

The party with the issue (whether it be a complaining consumer or a debt-recovery seeking bank) can initiate the arbitration and a resolution should occur within a year.

Now, you may be thinking: who would even think of pursuing a bank in arbitration over $10.

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Publicity of Lawsuits Rises With Social Media, Arbitration Would Protect

Today The New York Times reported how some websites and social media networks have streamlined the access to court documents, causing public humiliation for the plaintiffs.  Specifically, the article mentions sexual harassment claimants’ lawsuits, a very personal and humiliating claim.

Filing a lawsuit in court is a double-edged sword.  On one hand, it provides you a public forum in which to hash out your legal issues and personal information.  This may garner  attention from similiarly-situated plaintiffs who want to join your lawsuit, maybe form a class action.  Additionally, it may alert potential witnesses to the matter who can reach out and help the case.  However, it may also provide unwanted attention from the media and judgey social media users.  This fishbowl affect may lead to increased stress that a lawsuit doesn’t already cause, and may damage relationship and future employment opportunities.

In contrast, a plaintiff who decides to resolve a dispute in private arbitration, is shielded from public scrutiny.  Something corporate defendants are longing for and engage in with business to business commerical arbitrations.

Copyright 2015 The Filutowski Law Firm, PLLC. Disclaimer: This page is intended for general information purposes only and should not be construed as legal advice or legal opinions on any specific facts or circumstances. An attorney-client relationship is not created or continued.

Mandatory Consumer Arbitration, Possible Friend, Not Foe For Consumers

The past few years have seen a series of scorning headlines, dismissing any value for consumers with mandatory arbitration.   I wrote about some corporation’s over-reaching, and unreasonable imposition of arbitration upon an unknowing customer, namely General Mills website arbitration statement.  The binding arbitration movement, is in reality, a move by corporations to silence consumers and avoid, drawn out, embarassing and costly litigation.   However, not all is bad in arbitration for the consumer.  To understand the positives, let’s look at the negative hype.

Opponents to mandatory consumer arbitration argue that the consumer:

  1. cannot negotiate the agreement that contains the binding arbitration clause
  2. is forced to give up their right to their day in court
  3. is silenced through the confidentiality clause
  4. cannot form a class action lawsuit to more efficiently bring claims and change corporate misconduct
  5. cannot afford arbitration
  6. will not have a fair process, and will not obtain justice
  7. have no right to an appeal

Yet, all is not lost in arbitration for the consumer.  In fact, much can be gained.  

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The Facts of AT&T v. Concepcion

Why are we seeing more in the news about consumer arbitration?  It started with the U.S. Supreme Court’s decision in AT&T v. Concepcion, 131 S. Ct. 1740 (2011), that AT&T’s arbitration clause in its cell phone service agreement with customer COncepcion was fair and that the Federal Arbitration Act (FAA) of 1925 overrode Concepcion’s attempt at pursuing a class action lawsuit.

So what is the uproar about?  Would Concepcion’s arbitration with AT&T really be that bad?  Here are the facts of the case taken directly from the court opinion.


  1. Vincenzo Concepcion was a customer with AT&T since 2002.
  2. the service agreement contained a clause that provided:
    • customers may initiate dispute proceedings by completing a one-page Notice of Dispute form available on AT & T’s Web site.
    • AT & T may then offer to settle the claim
    • if it does not, or if the dispute is not resolved within 30 days, the customer may invoke arbitration by filing a separate Demand for Arbitration, also available on AT & T’s Web site.  Terms of arbitration process are as follows:
      • AT & T must pay all costs for nonfrivolous claims;
      • Arbitration must take place in the county in which the customer is billed;
      • claims of $10,000 or less, the customer may attend in person, by telephone, or by written submissions;
      •  either party may bring a claim in small claims court in lieu of arbitration;
      • and that the arbitrator may award any form of individual relief, including injunctions and presumably punitive damages.
    •  AT & T cannot seek reimbursement of its attorney’s fees, and, in the event that a customer receives an arbitration award greater than AT & T’s last written settlement offer, requires AT & T to pay a $7,500 minimum recovery and twice the amount of the claimant’s attorney’s fees.
  3. Concepcion saw an AT&T advertisement for a free phone.  He went to a store to get it, and was told to pay the sales tax of $30.22 on the value of the phone.
  4. In 2006, Concepcion hired a lawyer and filed a lawsuit (which cost well over the amount in controversy, as today, the filing fee is $400) to pursue litigation over $30.22 and make allegations of false and deceptive advertising.
  5. AT&T tried to enforce its arbitration agreement, stating it was fair.  The court found the arbitration clause was not fair.
  6. AT&T appealled to the Supreme Court of the U.S. and won.


Had Concepcion filed a Notice of Dispute in 2006, he may have received his $30.22 already.  Or, if AT&T failed to settle, then Concepcion could have initiated arbitration, and an arbitrator would possibly have ordered AT&T to reimburse Concepcion the sales tax.  Or, he arbitrator may have found that AT&T did not act illegally by charging the sales tax, and would have ordered AT&T to pay nothing.