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Democratic Senators Propose Law to Deal with Mandatory Arbitration Clauses

Sunday, February, 21, 2016


A new bill was recently introduced that, if passed, would limit a company’s ability to force consumers to settle grievances outside of court through arbitration. This practice has become increasingly popular for companies and they include arbitration clauses in their consumer contracts in an effort to prevent consumers from suing them and taking them to court.

 

The bill was introduced by senators Patrick Leahy from Vermont and Al Franken from Minnesota and would make it illegal for companies to impose forced arbitration in consumer protection cases. Forced arbitration would also no longer be permitted in employment discrimination and other civil rights cases.

 

According to a senior member of the Consumers Union, the bill would restore the Federal Arbitration Act to the form Congress intended and allow that arbitration only be used to decide business disputes, instead of protecting companies against accusations of misconduct. Consumers would again be able to take companies to court, even if that company included an arbitration clause in its contract.

 

Arbitration clauses are often hidden in contracts related to loans, leases, checking accounts, credit cards, insurance policies, student loans, nursing home agreements, and consumer stores. Instead of court, these clauses force consumers to settle issues using the services of a private arbitrator, usually chosen by the company. The outcome remains confidential and there is very little room for appeal. Many victims of these clauses have lost out on their opportunity to file a lawsuit when mistreated or cheated out of money and the senator are hoping to change that risk for consumers.