October 27, 2016 Practice Points

Clinton Proposes to Limit Consumer and Employee Arbitration

By Mark Kantor

Hillary Clinton’s domestic arbitration proposal was described in a briefing paper earlier this month. The proposal, the relevant parts of which are quoted below, seeks both new Congressional legislation for agencies like the Federal Trade Commission, the Federal Communications Commission, and the Department of Labor in consumer, labor, and antitrust contexts, and new consumer and employee regulatory measures under existing agency statutory authority.  

Protect Consumers from Unfair and Deceptive Practices. Today, Clinton is discussing three critical priorities for strengthening consumer protection:

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Ensuring that consumers, employees, and small businesses can fight back on a level playing field when they’re harmed. Across the country, consumers and employees that have suffered harm at the hands of large corporations are forced to seek recourse with the deck stacked heavily against them.  Buried in the fine print of tens of millions of contracts—in contexts ranging from employment to credit cards to nursing homes—are forced “arbitration clauses” that block consumers and employees from taking corporations to court. When Wells Fargo’s customers tried to sue over the bogus accounts that had been set up in their name, they discovered that the fine print in their existing accounts had locked them out of court. When a 94-year-old nursing home resident died from an untreated head wound, her family’s lawsuit was blocked. And when the for-profit Corinthian Colleges collapsed, leaving thousands of students saddled with student loan debt, students were generally unable to sue because they had unknowingly signed away their right to take the school to court.

Arbitration can be a useful tool, for example, when sophisticated companies mutually agree to use arbitration to settle their disputes.  But for consumers and employees given no choice but to sign, such clauses too often tilt the playing field toward the corporations that include them in the fine print of contracts—while offering consumers and employees no way out. That’s why, as president, Clinton would work to:

* Arm federal agencies with the authority they need to address corporate practices that strip consumers and workers of their ability to protect their rights.

Clinton will call upon Congress to give federal agencies—like the Federal Trade Commission, the Federal Communications Commission, and the Labor Department—broad and clear authority to restrict the use of arbitration clauses and related provisions in consumer, employment, and antitrust contexts.

*Order agencies to use their existing authority to curb the overuse of harmful forced arbitration clauses.

The Obama Administration has made substantial progress in curbing the overuse of mandatory arbitration clauses—undertaking important efforts at the Consumer Financial Protection Bureau, Department of Education, Centers for Medicare and Medicaid Services, and more. Clinton would build on these efforts, ordering executive agencies to pursue additional measures to level the playing field for consumers and employees under their existing authorities. And she believes the Securities and Exchange Commission should pursue the rulemaking authorized under Dodd-Frank to ensure that investors have appropriate legal recourse if they are wronged.

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This briefing paper does not contain any proposals about investor-state arbitration or international trade agreements.

Keywords:  alternative dispute resolution, adr, litigation, consumer, employee, arbitration, Consumer Financial Protection Bureau, Dodd-Frank

Mark Kantor is a member of the College of Commercial Arbitrators in Washington, D.C.


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