U.S. Sen. Sherrod Brown (D-OH) introduced a bill in the Senate that would prohibit banks and other financial institutions from using forced arbitration clauses against consumers who want to seek restitution.
Financial companies often use arbitration clauses to avoid a trial by jury or prevent consumers from joining a class-action lawsuit. With arbitration clauses, consumers with disputes take part in private arbitration proceedings. Brown said the proceedings are inconvenient and costly, and consumers rarely prevail. Brown said the clauses are typically buried in lengthy and dense agreements and are typically non-negotiable.
The Arbitration Fairness for Consumers Act would ban this practice by amending 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 bill, such agreements would be neither valid nor enforceable.
“Forced arbitration clauses let big companies hide from accountability and silence victims, giving more power to Wall Street over workers and their families,” Brown, chair of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, said. “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 bill is co-sponsored 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).
“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,” Linda Lipsen, CEO of the American Association for Justice, said.
The bill 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.