Well-documented and widespread predatory financial industry practices contributed to the worst economic crisis since the Great Depression. As more and more American families face economic hardship, the status quo is simply no longer an option. The Consumer Financial Protection Agency Act of 2009 (H.R. 3126), sponsored by Rep. Barney Frank (D-Mass.), has the potential to protect consumers from rampant abuses in financial services contracts by restoring transparency and accountability in the marketplace.
Banning the abusive practice of forced arbitration in consumer contracts is critical to this effort. The House bill rightfully addresses forced arbitration. Forced arbitration clauses are hidden in the fine print of everyday consumer contracts from job applicants and nursing home agreements to credit card billing inserts and mortgage loans. Corporations use these one-sided arbitration clauses as a shield to avoid accountability by forcing consumers to unknowingly sign away their legal rights.
Fair Arbitration Now, a coalition of over 70 member and supporter organizations representing a wide array of consumer and employment groups, has spoken out against the use of forced arbitration and is encouraged that the House bill addresses restricting this one-sided and self-serving corporate practice. In the coming weeks, as the financial industry lobbyists ratchet up their campaigns to keep the status quo, the coalition is committed to working with members of Congress to strengthen the language against forced arbitration in the current bill and put an end this practice in financial services contracts.
Congress has a duty to listen to the taxpayers that have bailed out the big banks and financial institutions. Americans clearly oppose the use of forced arbitration clauses. A poll released by the Fair Arbitration Now coalition shows that six in ten likely voters oppose the use of mandatory binding arbitration clauses in employment and consumer contracts.
Two other bills have been introduced that would stem the abusive practice of forced arbitration. The bipartisan Arbitration Fairness Act (S. 931 / H.R. 1020), sponsored by Sen. Russ Feingold (D-Wis.) and Rep. Hank Johnson (D-Ga.), would ensure that the decision to arbitrate is made voluntarily and after a dispute has arisen, so corporations cannot manipulate the arbitration system in their favor at the expense of consumers and employees. The bipartisan the Fairness in Nursing Home Arbitration Act (S. 512 / H.R. 1237), introduced by Sens. Mel Martinez (R-Fla.) and Herb Kohl (D-Wis.) and Rep. Linda Sanchez (D-Calif.), would eliminate forced arbitration clauses in nursing home contracts.
For more information on forced arbitration and AAJ’s effort to outlaw this practice, visit www.justice.org/forcedarbitration.