Legislation that would bar the use of forced arbitration clauses against consumers has been introduced in the U.S. Senate, Financial Advisor reports.
The bill, titled the “Arbitration Fairness for Consumers Act”, was introduced by Sen. Sherrod Brown (D-Ohio) and Sen. Chris Van Hollen (D-Md.) and has 21 co-sponsors.
Currently, big banks and financial institutions use arbitration clauses to prohibit customers from seeking a jury trial or joining class-action lawsuits. Instead, their disputes are taken to private arbitration forums. Brown and Van Hollen said these proceedings are costly, inconvenient, and usually unsuccessful for consumers. The new legislation would prohibit pre-dispute arbitration agreements and class-action waivers in contracts for consumer financial products or services. These agreements would not be valid or enforceable under the Act, which would amend the Consumer Financial Protection Act of 2010.
“Forced arbitration clauses let big companies hide from accountability and silence victims, giving more power to Wall Street over workers and their families,”said Brown. “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 these powerful special interests.”
Brown added that consumers rarely prevail in the private arbitration proceedings, citing a report that said corporations who take consumers to arbitration win 93% of the cases compared to a 9% success rate for consumers in arbitration disputes.
He said the forced arbitration clauses are tucked into lengthy customer agreements which are not always understood by consumers
Last month the Public Investors Advocate Bar Association, an organization of securities arbitration attorneys, called for prohibiting RIAs from using forced arbitration agreements in their account agreements.
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