March 07, 2022

Brown Introduces Bill to Protect Consumers By Banning Forced Arbitration

WASHINGTON, D.C. – U.S. Sen. Sherrod Brown (D-OH), Chairman of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, introduced the Arbitration Fairness for Consumers Act, legislation to prohibit banks and other financial institutions from using forced arbitration clauses against consumers who want to seek restitution and justice.

“Forced arbitration clauses let big companies hide from accountability and silence victims, giving more power to Wall Street over workers and their families,” said Sen. Brown. “Too many consumers miss these and are tricked into signing away to corporations their right to pursue justice. This bill will remove these clauses to finally end this abusive practice for financial products and services, and give Americans a fighting chance against powerful special interests.”

The legislation is cosponsored by U.S. Sens. Brian Schatz (D-HI), Raphael Warnock (D-GA), Elizabeth Warren (D-MA), Robert Menendez (D-NJ), Chris Van Hollen (D-MD), Dianne Feinstein (D-CA), Bernie Sanders (I-VT), Edward Markey (D-MA), Jack Reed (D-RI), Richard Blumenthal (D-CT), Alex Padilla (D-CA), Ron Wyden (D-OR), Sheldon Whitehouse (D-RI), Mazie Hirono (D-HI), Amy Klobuchar (D-MN), Catherine Cortez Masto (D-NV), Dick Durbin (D-IL), Cory Booker (D-NJ), Bob Casey (D-PA), Kirsten Gillibrand (D-NY), and Ben Ray Luján (D-NM).

Financial institutions use arbitration clauses to take away consumers’ constitutional right to pursue a trial by jury or to join a class action lawsuit. Consumers with disputes are forced into private, closed-door arbitration proceedings that are not only inconvenient and costly, but are also ones in which consumers rarely prevail. Such clauses are typically non-negotiable, and companies frequently hide them in agreements that are lengthy and dense.

The Arbitration Fairness for Consumers Act bans these abusive practices. The Act amends Title X of the Consumer Financial Protection Act of 2010 to prohibit pre-dispute arbitration agreements and class-action waivers in contracts for consumer financial products or services. Under the Act, such agreements would be neither valid nor enforceable. A one-pager on the bill is available here. The bill text is available here.

“When Americans who use payday loans, private student loans, credit monitoring and credit cards are defrauded by big banks and financial institutions, they are forced into a one-sided, off-the-books system where they have no meaningful chance at seeking justice or attaining accountability. This bill will restore Americans’ rights to hold big banks accountable for fraud and other wrongdoing. We thank Senator Brown for his leadership on this issue,” said Linda Lipsen, CEO of American Association for Justice.

“We are at a moment of reckoning in our society. Consumers, among others, are standing up to corporate behemoths that have historically used their enormous lobbying power to silence dissent and keep systemic wrongdoing in the shadows. We strongly support measures that increase access to justice for all people and the ability to hold the powerful accountable. One way to do that is to empower consumers by banning the use of forced arbitration clauses in consumer financial products and services. Public Citizen supports the Arbitration Fairness for Consumers Act because it would restore consumers’ rights to use the courts to hold wrongdoers accountable for systemic wrongdoing,” said Remington A. Gregg, counsel for civil justice and consumer rights for Public Citizen.

The legislation has been endorsed by the American Association for Justice, Public Citizen, UnidosUS, US PIRG, Center for Responsible Lending, Consumer Federation of America, Americans for Financial Reform, National Association of Consumer Advocates, and the National Consumer Law Center (on behalf of its low-income clients).