Companies have been taking away your right to sue them when they screw up for years, using small, hidden clauses to require mandatory binding arbitration instead. After years of consumer groups voicing their concern over this anti-consumer practice, there’s finally a new bill in congress that proposes to bring back your right to sue.
The Arbitration Fairness Act of 2015 [PDF], which was introduced by Minnesota Sen. Al Franken and Georgia Rep. Hank Johnson, would eliminate mandatory arbitration clauses in employment, consumer, civil rights and antitrust cases by amending the Fair Arbitration Act to its original intent.
The use of arbitration clauses has skyrocketed by companies since 2011, when the U.S. Supreme Court affirmed that it was perfectly okay for companies to take away a consumer’s right to sue or their ability to join other wronged consumers in a class action case by inserting a paragraph or two of text inside lengthy contracts.
To add insult to injury, most consumers are unaware that they’ve signed away their right to be heard in court. A Consumer Financial Protection Bureau report from March found that 75% of consumers surveyed did not know if they were subject to an arbitration clause in their credit card contract. And among consumers whose contract included an arbitration clause, fewer than 7% recognized that they could not sue their credit card issuer in court.
“There is overwhelming evidence that forced arbitration creates an unaccountable system of winners and losers,” Sen. Johnson said in a statement. “Unlike America’s civil justice system, which has evolved through centuries of jurisprudence and social progress, forced arbitration does not provide important procedural guarantees of fairness and due process that are the hallmarks of courts of law.”
According to a statement from Sen. Franken’s office, the Arbitration Fairness Act would restore the intent of the original Fair Arbitration Act (FAA) passed by Congress in 1925.
When FAA was passed it was intended to target commercial arbitration agreements between two companies of generally comparable bargaining power. Over the years, however, the Supreme Court broadened the reach of the law to include consumer and employment disputes, effectively superseding all other federal laws protecting consumers, workers and small businesses.
Under the newly introduced Arbitration Fairness Act of 2015, agreements to arbitration of employment, consumer, civil rights and antitrust disputes could only be made after the dispute has arisen.
To be clear, the Act doesn’t prohibit companies and consumers from going to arbitration to settle a dispute, it simply mandates that the decision to go into arbitration not be made before the dispute has actually taken place.
The Act seeks to ensure transparency in civil litigation by protecting the integrity of Civil Rights Act, the Equal Pay Act, the Americans with Disabilities Act, and the Age Discrimination in Employment Act and others that are frequently skirted by companies using forced arbitration.
Additionally, the Act would continue to allow pre-dispute mandatory arbitration to continue in business-to-business agreements, and does not apply to collective bargaining agreements.
“The Arbitration Fairness Act, is a commonsense reform to our justice system that will restore Americans’ right to challenge unfair practices by corporations and ensure meaningful legal recourse when everyday Minnesotans and small businesses are wronged,” Franken says in a statement. “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.”
Consumer groups, many of which have called on regulators to revise forced arbitration rules, applauded the Act’s introduction.
Both the National Consumer Law Center and the National Association of Consumer Advocates say they support the new measure, calling on Congress to follow through restoring consumers’ Constitutional rights.
“We should never have to give up our Constitutional rights just to do the everyday things in our lives,” NACA’s legislative director Ellen Taverna said in a statement. “The Arbitration Fairness Act stands up for consumers, servicemembers, workers and all Americans and restores our right to hold corporations accountable when they break the law.”