It appears the net is tightening around the issue of mandatory arbitration agreements, with another federal agency aiming to eliminate the practice of stripping consumers of their rights. Today the Federal Communications Commission (FCC) said it has started working on rules that would limit the use of arbitration agreements in contracts customers sign with Internet service providers (ISPs).
The announcement comes on the heels of a September announcement by the Centers for Medicare and Medicaid Services (CMS) that it has finalized a rule that will ban nursing homes and long-term care facilities from requiring patients, residents or their family members to sign pre-dispute mandatory arbitration agreements. The rule is set to go into effect Nov. 28, 2016, and will allow people to file lawsuits related to medical negligence at these facilities.
“Forced arbitration clauses in consumer contracts have long been viewed by consumers and their advocates as a license to steal,” says Beasley Allen lawyer W. Daniel “Dee” Miles, III, head of the firm’s Consumer Fraud section. “That description has proven true since their introduction around 1995. It is refreshing to now see major governmental agencies abolishing these forced arbitration practices by corporations, and prohibiting these clauses in everyday consumer transactions.”
The FCC announced its intention to address arbitration agreements after releasing new rules today that will require ISPs to get opt-in consent from consumers before sharing Web browsing data and other private information with advertisers or other third parties. Today’s rule will apply to home and mobile data carrier services, and is being heralded as a monumental step in ensuring consumers have more power over how ISPs handle their personal data.
FCC Chairman Tom Wheeler said the issue of mandatory arbitration clauses will be addressed in a separate rulemaking, with a goal of developing the Notice of Proposed Rulemaking (NPRM) “no later than February 2017.” At that time, the NPRM would be subject to a public comment period. Wheeler said he would hope to have a final rule by the end of 2017.
Arbitration agreements, often referred to informally as “rip-off clauses,” require often unknowing consumers to waive their Constitutional right to a jury trial should something go wrong. These agreements are widely used by banks, internet providers, and other industries to strip customers of their right to sue. Instead of seeking a remedy through the court system, consumers are forced to take their claim to a private arbitration firm chosen by the company, where they will be effectively powerless to present evidence or appeal an unjust decision.