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Arbitration Fairness Act Intended to Protect Consumers

Wednesday, April, 20, 2011


The Arbitration Fairness Act (AFA) was reintroduced to Congress in 2009.  This bill would ban certain kinds of contracts from making binding arbitration mandatory for dispute resolution.  Employment arbitration, for example, would no longer be mandatory.  Consumer and franchise contracts would also be banned from including mandatory binding arbitration clauses.  The bill is being sponsored by Representative Hank Johnson and in the 2009 congressional term, had support from at least 36 additional members of the House.

 

AFA: Not Yet Law

 

The act has not yet gone through the full legislative process to become a law, but has wide support from consumer groups.  Binding mandatory arbitration means that consumers and employees subject to such contracts no longer have the option of going to court to resolve a dispute.  Many consumer contracts for goods and services contain clauses requiring binding arbitration to be used in the event of a dispute.  The view of consumer groups is that the arbitration process can be biased in favor of the large corporations and that a court process would provide more justice for consumers and employees.

 

Credit card contracts as well as home purchase contracts and agreements related to employment frequently require binding arbitration as the only recourse should a dispute arise.  In binding arbitration, the result of the case is final and no appeal to the courts is possible except under very limited circumstances.  It remains to be seen whether the AFA will become United States law.