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Worker and Consumer Advocates Call on Congress to Pass the Arbitration Fairness Act and Stop Forced Arbitration

May 7, 2013

Worker and Consumer Advocates Call on Congress to Pass the Arbitration Fairness Act and Stop Forced Arbitration

Companies Force Consumers, Workers to Give Up Right to Go to Court When They Buy Products and Services, or Take a Job

WASHINGTON, D.C. – A coalition of 44 public interest organizations is urging Congress to pass the Arbitration Fairness Act of 2013 (AFA), S. 878 and H.R. 1844, introduced today by U.S. Sen. Al Franken (D-Minn.) and in the House of Representatives by Rep. Hank Johnson (D-Ga.). This legislation would help reverse a trend of companies using contractual fine print to force wronged workers and consumers out of the courts and into binding mandatory (or forced) arbitration that often favors the company.

“Corporations that place forced arbitration clauses in their standard contracts with consumers and non-union employees shield themselves from accountability for wrongdoing,” the coalition said in its letter. “The contracts typically state who the arbitrator will be, under what rules the arbitration will take place, the state the arbitration will occur in, and the payment terms for the arbitration. Arbitration clauses are often contained in non-negotiable contracts and a person has no choice but to acquiesce or forgo the goods, services and/or employment altogether.”

Forced arbitration allows companies to violate consumer, employee and antitrust contracts with impunity, knowing that they will not be held accountable by an impartial judge or jury, but rather by arbitrators who rely on those very corporations for business. The groups noted that unscrupulous businesses use forced arbitration in student loans, payday loans, credit card contracts, auto deals, rent-to-own and other everyday transactions.

Recent, examples of consumers and employees from all walks of life who have been victimized by forced arbitration include:

Matthew Kilgore, of Rohnert Park, Calif., a former student of a failed helicopter trade school who, along with other students, was left with tens of thousands of dollars in student loan debt, no certification and no access to the courts.

– Wendy Betts, a Sanford, Fla., resident who was victimized by illegal payday loans and spent years fighting to seek redress for herself and others, but was ultimately blocked by a provision tucked into the fine print of the loan document.

– Richard Embry, a Louisville, Ky., resident, and other nursing home residents who suffered from fatal neglect and mistreatment, and whose families are unable to seek legal recourse.

– Michael Garrett, a Heath, Texas resident and U.S. Marine Corps Reservist whose Fortune 500 retail employer fired him in anticipation of potential deployment to Iraq. He was forced into binding, secret arbitration of his Uniformed Services Employment and Reemployment Rights Act claims.

“With nearly no oversight or accountability, businesses or their chosen arbitration firms set the rules for the secret proceedings, often limiting the procedural protections and remedies otherwise available to individuals in a court of law,” the letter says. “For example, the ability to obtain key evidence necessary to prove one’s case is restricted or eliminated. In addition, the exorbitant filing fees, continuous fees for procedures such as motions and written findings, and ‘loser pays’ rules in arbitration are prohibitive to many individuals, particularly in this weak economy when so many Americans are struggling just to make ends meet.”

The AFA would ban forced arbitration in consumer and employment contracts, although it would not affect collective bargaining agreements. Voluntary arbitration and other forms of dispute resolution would remain intact. The legislation is designed to restore the congressional intent behind the 1926 Federal Arbitration Act (FAA), which provided for parties of similar power to resolve disputes through arbitration.

The U.S. Supreme Court’s interpretation of the FAA was broadly expanded to permit corporations to prevent consumers and employers from joining together in class actions. On April 27, 2011, the court ruled in AT&T Mobility v. Concepcion that companies can use arbitration clauses to ban class actions in the fine print of contracts. As a result, thousands of valid legal claims by consumers and employees that expose corporate abuses have been suppressed and prevented from having their day in court.

“The Concepcion ruling makes it all the more vital for Congress to pass the AFA to provide individuals with a choice to arbitrate a claim rather than forcing them into arbitration,” says the letter. “The AFA would eliminate use of these pre-dispute clauses in consumer and employment contracts, returning the FAA to its original intent to facilitate private arbitration between sophisticated parties on equal footing.”

“By being forced into binding mandatory arbitration, an estimated 30 million non-union workers have lost essential protections established by our nation’s civil rights laws,” the coalition writes, providing a long list of fundamental legislated protections that are threatened by forced arbitration:

“Other laws at risk include provisions of the Civil Rights Acts of 1964 and 1991, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Family and Medical Leave Act, the Fair Labor Standards Act, the Equal Pay Act, USERRA, the Sherman Antitrust Act, the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act, the Dodd–Frank Wall Street Reform and Consumer Protection Act, the Servicemembers Civil Relief Act, the National Defense Authorization Act for Fiscal Year 2013 (amending the Military Lending Act), the Lilly Ledbetter Fair Pay Act of 2009, the Telephone Consumer Protection Act, the Fair Debt Collection Practices Act, the Credit Repair Organizations Act, the Electronic Fund Transfer Act, the False Claims Act, the Fair Credit Reporting Act, the Right to Financial Privacy Act, the Real Estate Settlement Procedures Act, the Truth in Lending Act, and the civil provisions of the Racketeer Influenced and Corrupt Organizations Act.”

The organizations sending this letter are:

Association of University Women (AAUW)
American Federation of Labor-Congress of Industrial Organizations (AFL-CIO)
Alliance for Justice
American Association for Justice
American Civil Liberties Union
Americans for Financial Reform
Center for Justice & Democracy
Center for Responsible Lending
Citizen Works
Committee to Support the Antitrust Laws
Consumer Action
Consumers for Auto Reliability and Safety
Consumer Federation of America
Consumer Watchdog
Consumers Union
DC Consumer Rights Coalition
Every Child Matters Education Fund
Empire Justice Center
Homeowners Against Deficient Dwellings
Home Owners for Better Building
Leadership Conference on Civil and Human Rights
Maryland Consumer Rights Coalition
National Association of Consumer Advocates
National Association of Shareholder and Consumer Attorneys (NASCAT)
National Community Reinvestment Coalition
National Consumer Law Center (On behalf of its low income clients)
The National Consumer Voice for Quality Long-Term Care (formerly NCCNHR)
National Consumers League
National Council of La Raza
National Fair Housing Alliance
National Employment Law Project
National Employment Lawyers Association
National Women Health Network
National Women’s Law Center
New Jersey Citizen Action
People for the American Way
Public Citizen
Union Plus
U.S. Public Interest Research Group
West Virginia Association for Justice
West Virginia Citizen Action Group
Woodstock Institute