H.R. 1020 – The Arbitration Fairness Act of 2009: Protect Consumers from Abusive Mandatory Arbitration Clauses!

Buried in the fine print of credit card billing inserts, cellular phone service disclosures, employee handbooks, health insurance plans, and franchise agreements, mandatory arbitration clauses eliminate Americans’ access to the courts, forcing them instead into a costly, private legal system that favors corporations.  Lenders use these hidden clauses to protect themselves against lawsuits for credit card terms and fees that are buried in the fine print, and car loans and leases with exploding interest rates. Especially in these economic times, it’s time to put an end to this practice that takes advantage of people who are just trying to make ends meet.

Employers and businesses like to say that people have a choice to use arbitration or go to court – but they don’t.  If someone refuses to sign a contract with forced arbitration but still shows up for work or uses a product or service, they lose even the option of going to court.  Even if they never read the clause – which is usually buried in the fine print – they are forced to use a private legal system of arbitration instead of getting their day in court and a fair jury trial. Americans should never have to give up their rights just to do the everyday things in their lives.

How Consumers are Hurt by the Fine Print

When corporations impose arbitration in non-negotiable contracts, using their bargaining power to take away people’s legal rights, it becomes an abusive weapon. Arbitration can be a fair and effective method of dispute resolution when parties voluntarily agree to arbitrate. Instead, corporations have created one-sided forced arbitrations that burden consumers and deprive them of equal justice under the law.

• Privatizing Justice.  Arbitration is a private system without an impartial judge, jury, or meaningful appeal.  There is no public review of decisions to ensure the arbitrator got it right.  Federal law does not require that arbitrators have legal training or even follow the law.  We need to a system that is transparent and accountable to the public for a change.
• Eroding Legal Protections.  Mandatory arbitration means giving up the most fundamental legal protection: the right to equal justice under the law.  American heroes fought hard for dozens of laws that protect them against discrimination based on age, sex, religion, race, disability, and unequal pay for equal work, such as the Civil Rights Act and the Equal Pay Act.  But these laws are meaningless if unenforceable in court.  It’s time to close the arbitration loophole that gives employers the right to ignore civil rights.
• Imposing High Costs. People deserve their day in court without going bankrupt to have it. But arbitration can cost thousands of dollars that most Americans can’t afford, especially in these tough economic times. Companies can force individuals to travel thousands of miles on their own dime to arbitrate. And if they lose – which happens the majority of the time – there is a good chance they’ll have to pay the company’s legal fees too. Americans deserve a fair shot at getting justice.
• Weakening Civil Justice Safeguards. Forced arbitration strips employees and consumers of their basic constitutional rights, such as a jury trial by their peers, an impartial and qualified judge, to discover evidence for their case, to appeal or to bring a class action lawsuit.  In fact, arbitrators’ decisions must be upheld even if they disregard the law. Americans deserve judges who believe that the constitution provides for fair and equal justice for everyone in America, not just for the wealthy and powerful.

H.R. 1020, the Arbitration Fairness Act of 2009

When Congress enacted the Federal Arbitration Act (FAA) in 1925, its goal was to allow an alternative forum for commercial parties on equal footing to resolve their disputes. The Arbitration Fairness Act of 2009, introduced by Rep. Hank Johnson (D-GA), reflects the FAA’s original intent by requiring that agreements to arbitrate employment, consumer, franchise, or civil rights disputes be made after the dispute has arisen. 

The bill would amend the FAA to prevent the use of pre-dispute mandatory arbitration clauses in consumer, employment and franchise agreements. This legislation would not prohibit arbitration. 

• This legislation will ensure that the decision to arbitrate is truly voluntary and that the rights and remedies provided for by our judicial system are not waived under coercion. 
• This legislation would allow pre-dispute mandatory arbitration to continue in most business-to-business agreements.  
• This legislation would not apply to collective bargaining agreements.  

The Arbitration Fairness Act would restore traditional market principles to the arbitration industry: giving consumers a choice to arbitrate creates a market in which arbitration companies have to compete for their business, instead of simply catering to corporations. When arbitration is post-dispute—and therefore voluntary—arbitration companies must offer a fair process that both parties would choose willingly.

The Arbitration Fairness Act of 2009 is supported by a broad coalition of groups, including: the AFL-CIO, SEIU, Consumer Federation of America, Alliance for Justice, Center for Responsible Lending, American Association for Justice, Leadership Conference on Civil Rights, National Association of Consumer Advocates, National Consumer Law Center on behalf of their low-income clients, National Consumers League, National Employment Lawyers Association, Public Citizen, U.S. PIRG, NCCNHR: The National Consumer Voice for Quality Long-Term Care, and Consumers for Auto Reliability and Safety.

Please Support the Arbitration Fairness Act of 2009