WASHINGTON — House and Senate Democrats have introduced a bill to prohibit companies from using mandatory arbitration clauses, more than a year after Congress repealed a Consumer Financial Protection Bureau rule that would have banned mandatory arbitration clauses in financial contracts.
The legislation, known as the Forced Arbitration Injustice Reversal Act, is sponsored by Sen. Richard Blumenthal, D-Conn., and Rep. Hank Johnson, D-Ga. It would prohibit forced arbitration clauses in consumer, employment and other types of contracts. Yet the bill would still enable employees or consumers to choose arbitration to settle a dispute if they determined it was a better option.
“There is a lot of use of the word ‘rigged’ these days,” Blumenthal said in a press conference Thursday. “One of the systems that is truly rigged against consumers and workers and the American people is our current system of forced arbitration.”
The legislation is supported by Consumer Reports, which said in a letter to Blumenthal that “it would reverse a spreading injustice in the marketplace.”
“When forced on consumers and workers in this way, the arbitration process, designed by corporations and their lawyers, inherently tends to be one-sided, tilted to favor the corporation that has arranged for it,” Consumer Reports Senior Policy Counsel George Slover wrote in the letter. “The process is a ‘black hole,’ where the law does not apply, there is no right of appeal, and the outcome is secret. The arbitrator, chosen by the corporation, has the incentive to heed the interests of the corporation, in hopes of repeat business.”
The new effort comes after the Senate barely passed a resolution to block the CFPB’s arbitration rule through a Congressional Review Act resolution in October 2017. Vice President Mike Pence had to cast a deciding vote breaking a 50-50 tie after two Republicans — Sens. Lindsey Graham, R-S.C., and John Kennedy, R-La. — voted with Democrats against repealing the rule. The House resolution to block the rule passed entirely along party lines while Republicans controlled the chamber in the previous Congress.
Blumenthal said he was confident that the resolution will pass the newly Democratic-controlled House and he is hopeful that the Senate will consider the legislation. So far, 34 Senate Democrats have signed onto the bill.
A spokesperson for Blumenthal said the bill will likely be referred to the Senate Judiciary Committee, which Graham chairs.
