Congress Considers Two New Bills Limiting Arbitration and Class Action Waivers in Consumer Contracts — Chicago Class Action Defense Attorneys Near Oak Brook and Naperville

Congress is currently considering two new bills that take aim at the practice of requiring consumers to agree to resolve all disputes through binding arbitration and including class action waivers in consumer contracts. If passed and signed into law, the laws could dramatically change the way businesses contract and resolve disputes with consumers.

The first bill being considered is the Forced Arbitration Injustice Repeal Act (“FAIR Act”). Introduced by Senator Richard Blumenthal of Connecticut in the Senate (S. 620) and Representative Hank Johnson of Georgia in the House (H.R. 1423), the FAIR Act seeks to amend the Federal Arbitration Act (“FAA”), 9 U.S.C. §1, et seq., and would prohibit the inclusion of mandatory arbitration clauses in contracts with employees and consumers.

The second bill being considered is the Arbitration Fairness for Consumers Act (S. 630) introduced in March of this year by Senator Sherrod Brown of Ohio in the Senate Committee on Banking, Housing, and Urban Affairs. Sen. Brown’s bill proposes to amend the Consumer Financial Protection Act of 2010 (“CFPA”) by prohibiting mandatory arbitration and class action waiver provisions in contracts that concern a “consumer financial product or service.” The bill would not apply retroactively to existing contracts that may contain such provisions but instead would apply only “to any dispute or claim that arises or accrues on or after the date of the enactment of this Act.”

An effort last October to pass a Consumer Financial Protection Bureau regulation prohibiting financial institutions, such as banks and credit card companies, from imposing mandatory arbitration agreements on customers suffered a narrow defeat when Vice President Mike Pence cast the tie-breaking vote against the regulation. Sen. Brown expressly referenced Vice President Pence’s vote in a statement released in conjunction with the bill which outlined the bill’s purpose of “ending the use of forced arbitration in student loans, credit card agreements, and employment contracts [to] give[] working Americans a fighting chance against powerful special interests.”

While Senator Brown’s bill would focus primarily on the contract practices of financial institutions, the FAIR Act proposes even greater controls on arbitration agreements in consumer contracts. Unlike the Arbitration Fairness for Consumers Act, which proposes amendments to the CFPA, the FAIR Act seeks to alter the dispute-resolution procedures employed by businesses by taking aim directly at the FAA—the source of federal law governing arbitration. Specifically, the FAIR Act seeks to amend the FAA to invalidate arbitration agreements and class action waivers in consumer contracts and employment contracts on a prospective basis. It also would invalidate current arbitration agreements and class action waivers that have already been signed but only regarding disputes that arise after the law goes into effect.

Super Lawyers named Illinois commercial law trial attorney Peter Lubin a Super Lawyer and Illinois business dispute attorney Patrick Austermuehle a Rising Star in the Categories of Class Action, Business Litigation, and Consumer Rights Litigation. Lubin Austermuehle’s Illinois business trial lawyers have over thirty years of experience in litigating complex class action, copyright, noncompete agreement, trademark and libel suits, consumer rights and many different types of business and commercial litigation disputes. Our Naperville and Hinsdale business dispute and restrictive covenant lawyers, civil litigation lawyers and copyright attorneys handle emergency business lawsuits involving copyrights, trademarks, injunctions, and TROS, covenant not to compete, franchise, distributor and dealer wrongful termination and trade secret lawsuits and many different kinds of business disputes involving shareholders, partnerships, closely held businesses and employee breaches of fiduciary duty. We also assist Chicago, Cook, and DuPage County area businesses and business owners who are victims of fraud. You can contact us by calling (630) 333-0333 or our toll-free number (833) 306-4933.  You can also contact us online here.