In April, lawmakers led by Sen. Al Franken (D-Minn.) and Rep. Hank Johnson (D-Ga.) reintroduced the Arbitration Fairness Act (AFA) of 2015. If passed, the legislation would eliminate mandatory arbitration clauses in employment, consumer, civil rights and antitrust cases.
The AFA was introduced before both houses of congress, and initially sought to cover arbitration agreements between companies that generally are on even footing as far as bargaining leverage. However, the U.S. Supreme Court expanded the scope of the Act to also apply to claims involving consumers and workers, who lack the same kind of power as corporations in contract negotiations.
Forced arbitration clauses that are mandatory are quite often found in the fine print of a document. Corporations use this tactic to shut Americans out of the court system. Instead, folks are funneled into what consumer advocacy groups consider to be a rigged forum decided by an arbitration company chosen by the very corporation that broke the law.
These restrictive clauses can be found in all sorts of consumer contracts and documents, from cell phone contracts and credit card agreements to college enrollment forms and nursing home admissions documents, and the list goes on. In a statement, Sen. Franken said:
For years, I’ve been fighting to reopen the courtroom doors to consumers, workers and small businesses in Minnesota. The proposal is a commonsense reform. It’s clear that we’re at a point where big corporations can write their own rules and insulate themselves from liability for wrongdoing – this can’t continue.
The bill’s co-sponsor in the House, Rep. Johnson, noted that mandatory arbitration essentially “immunizes corporations from accountability.” He had this to say:
The practice often takes place behind closed doors, shrouding corporate misconduct in secrecy away from public scrutiny. Furthermore, courts have limited authority to vacate an arbitrator’s decision, which typically is final and binding, while arbitrators are not even required to have legal training or faithfully apply the law.
In May, a coalition of 58 lawmakers, including Sen. Franken and Rep. Johnson, and backed by consumer advocacy organizations such as Public Citizen, National Association of Consumer Advocates, Americans for Financial Reform, and the National Consumer Law Center, suggested the legislation should include steps to protect consumers from forced arbitration clauses in financial services contracts as well. In a letter sent to the Consumer Financial Protection Bureau (CFPB), Sen. Franken said:
These clauses force individuals into private binding arbitration as a condition of buying a product or service, and are designed to stack the deck against consumers and ensure that the final outcome of forced arbitration is unreviewable by courts. Forced arbitration clauses – often buried deep within the fine print of financial products and service contracts – harm American consumers by depriving them of their day in court even when companies have violated the law.
This legislation is badly needed and hopefully the public will find out about it and help out. If enacted, the AFA would:
• Eliminate forced arbitration in employment, consumer, civil rights and anti-trust cases;
• Ensure that the decision to arbitrate is truly voluntary; and
• Restore fundamental rights created by state and federal laws that are currently at risk of being wiped out by forced arbitration.
Forced arbitration is particularly ubiquitous among predatory, for-profit colleges, leaving their victims unable to hold the schools accountable in court, and drowning in student loan debt. As you may recall, U.S. Sen. Dick Durbin (D-Ill.) and Rep. Maxine Waters (D-Calif.) introduced in May the Court Legal Access & Student Support (CLASS) Act of 2015, which will prohibit any school that receives student aid funding from the Department of Education from using forced arbitration against students. This legislation will protect students who have fallen victim to predatory, for-profit college scams, as well as the American taxpayers who are left footing the bill.
Forced arbitration is a widespread, abusive practice used by corporations to ensure that Americans can never hold them accountable in court when they break laws designed to protect consumers, employees and students, and it can only be stopped if Congress acts. Linda Lipsen, CEO of the American Association for Justice (AAJ), had this to say:
For too long, forced arbitration has denied Americans their right to hold corporations accountable when they are cheated, injured, or discriminated against. AAJ applauds Sen. Franken and Rep. Johnson for leading the charge to ensure access to justice for everybody – not just powerful corporations.
Since becoming a member of the Senate, Sen. Franken has repeatedly pushed for legislation to clamp down on mandatory arbitration. He has been a constant critic of forcing mandatory arbitration on consumers. Sen. Franken has stated that the justices’ 5-4 decisions in AT&T v. Concepcion and American Express v. Italian Colors were “activist decisions” that placed the interests of corporations over those of consumers. It will be interesting to see how many members of Congress agree with him. Hopefully there will be a majority in both the House and Senate who do agree and will also vote with Sen. Franken.
Sources: Law 360, Consumerist, Govtrack.us