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Senate Hearings Debate Federal Arbitration Act's Fairness

Wednesday, October, 19, 2011


The Federal Arbitration Act has made the news several times in recent months, thanks largely to the Supreme Court's ruling to uphold it in the Concepcion case.  This ruling caused companies to expand the use of mandatory binding arbitration clauses in consumer contracts, even in states that have laws banning the practice, since the SCOTUS ruling appeared to support the use of such clauses with virtually no exceptions.

 

Some Congressmen and Senators, however, do take exception to the practice of mandatory arbitration on principle.  Several months ago, a group of them headed by Senator Al Franken introduced the most recent incarnation of the Arbitration Fairness Act, a law designed to provide consumers with some safeguards against the use of binding and mandatory arbitration clauses.

 

Federal Arbitration Act Discussed

 

At Senate hearings last week, the issue of financial arbitration fairness was discussed.  If passed, the Arbitration Fairness Act would confirm the right of consumers to sue in court rather than be required to use arbitration to resolve disputes.  It would also allow such consumers to join together in class action lawsuits, something that the Concepcion ruling all but banned.

 

Testimony before the Senate Judiciary Committee focused on three witnesses who spoke in favor of the bill and two who spoke in opposition.  Supporters and opponents appear to break down along party lines, with Republicans opposed and Democrats in favor.  This means the bill's prospects in the Republican-controlled House of Representatives are not strong.