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Bicameral Group Of Lawmakers Introduce Bills To End Forced Arbitration

Tuesday, March 7, 2017
Melissa Stegman

Proposals Would Boost Transparency & Accountability Across Financial Sector

Today, a group of congressional lawmakers, led by U.S. Senator Al Franken (D-Minn.), introduced seven bills to restrict forced arbitration and improve access to our judicial system for servicemembers, consumers, workers, and students. Across the country, fine print agreements--from financial to employment contracts--too often include arbitration clauses to strip individuals from receiving their fair day in court. Pushing this effort forward to protect consumers are U.S. Sens. Sherrod Brown (D-Ohio), Dick Durbin (D-Ill.), Patrick Leahy (D-Vt.), Sheldon Whitehouse (D-R.I), and Richard Blumenthal (D-Conn.), and U.S. Cong. Hank Johnson (D-Ga.), David Cicilline (D-R.I.), and Brad Sherman (D-Calif.).

“These proposals would ensure people have the right to join together in court and hold companies accountable for systemic misconduct," said CRL Senior Policy Counsel Melissa Stegman. "Last year's Wells Fargo scandal highlights the real harm forced arbitration causes, as customers who attempted to sue the bank over phony accounts were blocked from the court–-keeping the growing problem out of the public eye. Everyone, including our servicemembers, should be protected from rip-off clauses buried in the fine print of customer agreements. CRL commends these lawmakers for continuing to make consumer protection a top priority."

Each day, consumers unknowingly sign contracts containing forced arbitration clauses that deny them the ability to pursue a case in court. Arbitration is a way for companies to handle disputes in secret, preventing the exposure of unfair lending practices to the public at large. Research from CRL and other consumer advocacy organizations shows that arbitration is a stacked deck that favors financial institutions at the expense of consumers.

The following are brief descriptions of the bills introduced:

  • Justice for Victims of Fraud Act would close the “Wells Fargo loophole” by clarifying that forced arbitration clauses do not apply to checking and credit card accounts fraudulently opened without a customer’s consent.
  • Arbitration Fairness Act would prohibit the use of mandatory, pre-dispute arbitration agreements in consumer, employment, civil rights, and antitrust cases.
  • Restoring Statutory Rights and Interests of the States Act would ensure that mandatory arbitration clauses cannot be interpreted to preempt civil rights claims or other statutory causes of actions.
  • Court Legal Access and Student Support (CLASS) Act would prohibit an institution of higher education from receiving Title IV federal student aid funding if the school’s enrollment agreement requires mandatory arbitration or otherwise restricts students’ ability to pursue claims against the school in court. Because legitimate non-profit colleges and universities do not include mandatory arbitration clauses in their enrollment agreements, this legislation’s impact is squarely focused on those schools that seek to profit off of their students while hiding from accountability in a court of law.
  • Mandatory Arbitration Transparency Act would invalidate and prohibit mandatory pre-dispute arbitration agreements that require the parties to the arbitration to keep matters surrounding the arbitration process confidential. This bill would prevent companies from brushing malfeasance under the rug, and therefore endangering the public, by forcing plaintiffs into secret proceedings hidden from other potential victims and from the public.
  • Justice for Servicemembers Act makes unenforceable any pre-dispute agreement to arbitrate a claim under the Uniformed Services Employment and Reemployment Rights Act (USERRA), which prohibits employment discrimination against servicemembers and veterans, and makes other changes to help plaintiffs enforce USERRA’s protections.
  • Safety Over Forced Arbitration Act prohibits mandatory, pre-dispute arbitration in cases where claims implicate public health and safety, including environmental cases. This means that the case can be heard in open court, so that the general public is aware of the risks and can take steps to learn about and prevent further harm.

For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Ricardo Quinto at ricardo.quinto@responsiblelending.org.