Bill banning pre-dispute arbitration agreements is back on Capitol Hill and the House has approved its version of the legislation, opposed by ACA International and joint industry trade groups, including the U.S. Chamber of Commerce.
03/21/2022 1:00 P.M.
3.5 minute read
The U.S. House of Representatives last week voted 222-209 to approve legislation that would remove the option for pre-dispute arbitration agreements in private contracts.
ACA International opposed the legislation, H.R. 963, the Forced Arbitration Injustice Repeal (FAIR) Act, in a coalition letter sent to the U.S. House of Representatives by the U.S. Chamber of Commerce and several other state and national joint industry trade groups before the vote.
“The FAIR Act would effectively eliminate the use and availability of pre-dispute arbitration agreements as a means to fairly resolve antitrust, employment, civil rights, and consumer disputes,” the letter states. “The ultimate goal of this bill is to promote expensive class action litigation that does little to help businesses, consumers, and employees. Such litigation serves principally to benefit the attorneys who file class action lawsuits.”
Reuters reports Republicans in the House objected to the bill because “it will deprive workers, consumers and companies of a faster and cheaper alternative to court.”
U.S. Rep. Matt Gaetz, R-Fla., is a co-sponsor of the House bill.
The House previously passed the bill in 2019, but it did not advance in the Republican-controlled Senate at the time, according to the article.
The companion bill in the Senate—the Arbitration Fairness for Consumers Act, S.B. 3755—introduced by U.S. Sen. Sherrod Brown, D-Ohio, was discussed in a March hearing on examining mandatory arbitration in financial services, ACA International previously reported. There are 23 co-sponsors for the Senate Bill.
The Arbitration Fairness for Consumers Act amends Title X of 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.
“ACA supports the use of arbitration as an alternative to addressing and resolving consumer complaints through formal legal proceedings,” said ACA CEO Scott Purcell in a letter to Brown and Ranking Member Pat Toomey, R-Pa., before the March 15 hearing. “Alternative dispute resolution through arbitration benefits consumers by reducing the time to achieve a resolution of claims brought by or against consumers, decreasing the expenses of all parties to the arbitral proceeding as compared to litigation, and limiting the legal and administrative fees of formal litigation.”
The U.S. Chamber of Commerce recently updated its research report on claimant outcomes in employment and consumer arbitration, and it continues to show that employees and consumers fare better in arbitration than in litigation.
According to the report, “Fairer, Faster, Better, III: An Empirical Assessment of Consumer and Employment Arbitration,” from 2014-2021, consumers initiated and prevailed in 41.7% of arbitrations that ended with awards compared to 29.3% of litigations that ended with awards.
“Similarly, employees initiated and prevailed in 37.7% of arbitrations that terminated with awards compared to 10.8% of litigations that terminated with awards,” according to the report.
At the Senate Banking Committee hearing, Todd Zywicki, professor of law at George Mason University Foundation, George Mason University Antonin Scalia School of Law, said that after 25 years in consumer finance, including as a former Federal Trade Commission and Consumer Financial Protection Bureau regulator, he’s seen that “consumers are not idiots,” and given the competitive consumer finance market, two-thirds of customer complaints result in full refunds. The CFPB found that fewer than 1% of consumers would seek to consult an attorney to address a financial product harm, he said.
There is also evidence that consumers can pay less in the arbitration process compared to litigation, according to research by Zywicki and Jason Scott Johnston, “The Consumer Financial Protection Bureau’s Arbitration Study: A Summary and Critique,” which he referenced in his hearing testimony.
If President Joe Biden signed the FAIR Act, it will expand a bill he already signed that bans enforcement of arbitration “agreements for workers alleging sexual harassment or assault,” Bloomberg Law reports. The White House supports the House bill, according to the article; however, the future of the arbitration bill in the Senate is “uncertain.”
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