Forced Arbitration

Floor Speech

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Mr. ELLISON. Mr. Speaker, I stand with Representatives Johnson, Sanchez, and my other colleagues to discuss a well-known scourge on the rights of everyday Americans: forced arbitration clauses.

People talk about how the rules are rigged. They say the deck is stacked in favor of powerful interests. Forced arbitration clauses are a perfect example of an unfair system. Powerful corporations rig the rules to make it more difficult for people to hold companies accountable for wrong doing.

Nearly all companies add non-negotiable clauses in contracts that people are required to sign when we open a bank account, get a credit card or a cell phone or choose a financial advisor. Virtually any product and service that requires we sign a contract that includes fine-print will limit our ability to seek damages in open court.

If consumers have a complaint, we are limited to secret arbitration forums. These arbitration forums are controlled by the corporation. The corporations decide the venue and the arbitrator. Even if the arbitrator makes a terrible ruling or makes egregious errors, the ruling likely cannot be appealed or reversed. In fact, arbitrators' decisions in prior cases are not publicly available.

How did we get to this point? How is it possible that nearly all consumer and investment contracts include forced arbitration clauses? Why are consumers forced to resolve disputes after they arise in secret courts, not in the public courts?

We should look across the street. No entity has done more to expand forced arbitration clauses than the Supreme Court. Numerous anti- consumer rulings have restricted people's freedom to take a company to court.

Last year the Supreme Court ruled that DirecTV California customers could not band together to fight an early termination fee assessed by DirecTV. Instead, each customer had to file individually and use arbitration. They could not seek a class action lawsuit.

In 2013, American Express v. Italian Colors preserved the monopoly powers of American Express so it could continue to charge retailers high fees. Retailers who had sought a class action lawsuit were restricted by arbitration clauses in their contracts.

In 2011, AT&T Mobility v Concepcion had the same outcome; people who were offered a ``free cell phone'' realized they were actually charged $30. Consumers sought damages as a class but the Supreme Court ruled that the customers had to pursue their claims individually through arbitration.

As you would expect, these anti-consumer rulings were decided on ideological lines. In fact, the late Justice Antonin Scalia wrote many of these decisions which were unfair or onerous to consumers.

But we are not giving up. We are pushing back hard against these mandatory arbitration contracts.

Congress barred forced arbitration clauses in residential mortgage terms.

Military members now have the right to go to court for disputes involving many types of loans.

Small-business auto dealers can choose to go to court when locked in disputes with the big auto manufacturers. Unfortunately, most auto dealers have deprived their own customers of this benefit.

The Consumer Financial Protection Bureau is working on a rule that could curb mandatory arbitration in consumer contracts. The CFPB could restore our ability to join our claims together to hold financial companies accountable when they break the law.

But there is still more work to do. The Securities and Exchange Commission has the authority to eliminate forced arbitration clauses that brokerage firms and financial advisors require their customers sign. But the SEC hasn't acted.

Therefore, I have sponsored legislation, the Investor Choice Act, (HR. 1098). My bill restores the rights of investors who are simply trying to save for retirement and other life goals. The bill says investors must have access to court to seek justice if advisors and brokers, who typically have the incentive to charge outsized commissions and fees, do not act in their customers' best interests. The bill has 21 cosponsors.

I am also a proud cosponsor of the Arbitration Fairness Act, Mr. Johnson's bill eliminates forced arbitration for all consumer and worker disputes;

I am also a cosponsor of the Court Legal Access & Student Support (CLASS) Act. This bill bans forced arbitration and class action prohibitions from college enrollment contracts.

Minnesota's own attorney general Lori Swanson has been a leader in trying to level the playing field for all Minnesotans. She worked to stop a corrupt arbitration provider from operating its business against consumers across the country; and she has urged federal regulators to eliminate arbitration clauses from nursing home contracts.

In closing, let me say, my colleagues and I are not seeking to do away with arbitration as a way for parties to work out their problems. We just think arbitration should be voluntary not mandatory.

I simply ask ``If arbitration is so fair, why force it? Why not present it as an alleged ``fair'' option when a dispute has arisen-- where both parties can consider all alternatives and agree on an appropriate forum?''

We know why: Because companies like forced arbitration clauses because they are a perfect tool to avoid liability for their actions.

If you want a fair system, if you want people to be able to accumulate wealth, then we need to stop these forced mandatory arbitration clauses in consumer and investor contracts.

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