How will AirBnB’s terms of service change affect users? Let’s be honest: very few people actually read the terms of service. Even the select few that try to be diligent and read them probably don’t understand 90% of the language used. This makes it nearly impossible to understand what the user is actually agreeing to.

AirBnB recently sent out a notice to make users aware that they were making changes to their terms of service agreement. These new changes could have major implications for users, especially for users who have had issues with the service and wish to seek legal action. The new terms will take effect beginning in May.

Changes to AirBnB’s Terms of Service

The top three changes most users will likely want to be aware of are:

1. Data collection practices,
2. Criminal background checks, and
3. Forced arbitration policies

One new provision in AirBnB’s terms of service states that AirBnB can share personal information. AirBnB can now share personal information of its users with affiliates and third parties for the purposes of targeted advertising. Given the recent data breach events from third-party vendors, sharing of personal information should raise some concerns.

As a result of user complaints and concerns, AirBnB will now be able to cross-reference a user’s personal information with public and non-public databases and use background checks. This can include “public records of criminal convictions.”

While there are certainly benefits to AirBnB performing checks for a user’s criminal record, users may not be aware the checks are being performed. The wording of the terms of service specifically ensures that AirBnB is able to use personal information to obtain these reports without further notification to the user. If AirBnB discovers information in the course of the check that the user should legally be informed of, AirBnB will pass on this information; otherwise, they are under no obligation to disclose what they learn about their users.

Mandatory Arbitration?

The mandatory arbitration policies allow AirBnB to keep conflicts out of the court system. AirBnB is also preventing the use of class-action lawsuits and class-wide arbitration against it. This means users will have to use individual arbitration. Since the decision is binding, there’s no recourse to the court system.

One challenge with arbitration is that a past decision by an arbitrator isn’t binding on future arbitration. There’s no precedent setting element like there is in the court system. One user goes through arbitration and gets one outcome, another user fighting the same issue could have a different result.

However, the method that AirBnB users use to agree to the changes could impact AirBnB’s ability to enforce the changes. According to Jeffrey Norton, a lawyer in New York, an arbitration clause can only be enforceable if the user actually agrees to it in a meaningful way.

Do You Agree?

There are two different systems commonly used by applications and service providers. Those include “clickwrap agreements” and “browsewrap agreements”. A clickwrap agreement works by making a user actively click an “I Agree” box. With browsewrap agreements, the terms are available via a link and aren’t physically brought to the attention of the user. Courts are more likely to enforce clickwrap agreements over browsewrap agreements. This is certainly something to keep in mind when using AirBnB or any other service mandating arbitration as the only means for solving disputes.

For more information regarding AirBnB’s terms of service or how to structure your company’s terms of service, contact Revision Legal’s Internet attorneys. Use the form on this page, or by calling 855-473-8474.

Image credit to Flickr user Open Grid Schedule / Grid Engine

Editors Note: this article was originally posted in May, 2016, and has been updated for clarity and comprehensiveness.

The Legal Enforceability of Mandatory Arbitration Clauses

Mandatory arbitration clauses in consumer contracts have been repeatedly upheld by US courts following the Supreme Court’s expansive reading of the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq. In AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), the Court held that the FAA preempts state laws that deem class action waivers in arbitration agreements unconscionable. American Express Co. v. Italian Colors Restaurant, 570 U.S. 228 (2013), extended that principle, holding that arbitration clauses with class action waivers are enforceable even when the practical cost of individual arbitration effectively precludes any recovery.

For platforms like AirBnB, these cases provide strong legal footing. When a user validly agrees to an arbitration clause, the platform can force any dispute — regardless of its size or importance — into individual arbitration. The user gives up the right to participate in a class action that might otherwise pool small individual claims into economically viable litigation.

Clickwrap vs. Browsewrap: Why the Distinction Is Outcome-Determinative

The enforceability of any online agreement ultimately turns on whether the user had actual or constructive notice of the terms and manifested assent to them. Courts evaluate this on a spectrum:

• Clickwrap. The user is presented with the terms — or a conspicuous link to them — and must affirmatively click an “I Agree” button before proceeding. Courts consistently enforce clickwrap agreements when the presentation is clear and the required action is unambiguous. See Specht v. Netscape Communications Corp., 306 F.3d 17 (2d Cir. 2002) (enforcing clickwrap while rejecting browsewrap in the same decision).
• Browsewrap. The terms are accessible via a hyperlink, but the user is not required to take any affirmative action to acknowledge them. Courts are far more skeptical of browsewrap, particularly when the link to the terms is obscure or the user would not reasonably understand that continuing to use the site constitutes agreement. In Nguyen v. Barnes & Noble Inc., 763 F.3d 1171 (9th Cir. 2014), the court declined to enforce an arbitration clause buried in a browsewrap because the user had no reasonable notice of it.
• Sign-in wrap. A hybrid form where users are told, near the “Sign Up” or “Continue” button, that by proceeding they agree to the terms linked nearby. Courts take varied approaches to sign-in wrap, depending on how conspicuously the notice is displayed and how clearly the hyperlink is identified as linking to binding legal terms.

When AirBnB updated its terms of service and notified users by email, the method of that notification mattered. If users were told “by continuing to use AirBnB you accept the new terms,” without an affirmative click, a court could potentially find insufficient assent — particularly for users who did not open the email or did not understand that continued use constituted agreement.

Data Sharing and Third-Party Privacy Risks

AirBnB’s revised terms authorizing sharing of user data with affiliates and third parties for targeted advertising purposes implicates several bodies of law. The California Consumer Privacy Act (CCPA), as amended by the California Privacy Rights Act (CPRA), requires businesses that sell or share personal information with third parties to disclose that practice clearly and provide California residents with the right to opt out. “Sharing” under the CCPA includes sharing for cross-context behavioral advertising purposes — precisely what AirBnB’s revised terms contemplate.

For users in other states with comprehensive privacy laws — Virginia (VCDPA), Colorado (CPA), Texas (TDPSA), and others — similar disclosure and opt-out rights may apply depending on the company’s threshold for coverage. Even users in states without comprehensive privacy laws may have FTC Act claims if the data sharing practices differ materially from what the platform represented at the time they signed up.

Background Check Practices and the FCRA

AirBnB’s revised terms allowing it to run criminal background checks on users without further notice implicates the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq. The FCRA imposes specific requirements when a company uses a consumer reporting agency to obtain background information on individuals and takes adverse action based on that information. If AirBnB uses a third-party background screening company — which is the typical industry practice — it is likely acting as a “user” of consumer reports under the FCRA and must comply with the Act’s disclosure, authorization, and adverse action notice requirements.

The FCRA requires that, before a consumer report is obtained, the company provide the individual with a clear and conspicuous written disclosure that it may obtain a consumer report and get the individual’s written authorization. The FCRA also requires that if the company takes any adverse action based on the report — for example, denying a user’s account or limiting their access — it must provide the individual with a pre-adverse action notice, a copy of the report, and a summary of their rights under the FCRA. Burying these rights in a general terms of service update may not satisfy the FCRA’s specific requirements.

What Users Should Do

Users who are concerned about AirBnB’s terms of service — or any platform’s terms — have limited but real options. Reading the terms, understanding what is being agreed to, and exercising opt-out rights where available are the most immediate steps. Users who believe their privacy rights have been violated should consult with an attorney promptly, because statutes of limitations on privacy and consumer protection claims typically run from the time the violation is or should have been discovered.

From a business perspective, companies drafting their own terms of service should take note: overly aggressive arbitration provisions and data sharing terms can generate regulatory scrutiny, user backlash, and litigation even when those terms are technically enforceable. The legal risk is real, but the reputational risk may be larger.

Talk to an Attorney

Whether you need help understanding your rights under a platform’s terms of service, or you are drafting terms of service for your own platform, Revision Legal’s internet attorneys can help. Contact us through the form on this page or call 855-473-8474.