Legislation Critical In Settling Arbitration Landscape

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For Immediate Release: July 22, 2009

Contact: Kerri Axelrod or Ray De Lorenzi
202-965-3500, ext. 369
media.replies@justice.org

Legislation Critical In Settling Arbitration Landscape

Arbitration Fairness Act will ban abusive practice of forced arbitration

Washington, DCYesterday evening, the American Arbitration Association (AAA) announced it would stop participating in debt collection forced arbitration proceedings until "new guidelines are established."  This follows Sunday's settlement between the Minnesota Attorney General and the National Arbitration Forum (NAF), in which the NAF agreed to no longer conduct any consumer forced arbitrations.

The following is a statement from American Association for Justice Senior VP of Public Affairs Linda Lipsen:

"For years, consumers have seen first-hand how corporations and private Wall Street forums take advantage of everyday people via forced arbitration clauses.  AAA's decision to stop engaging in debt collection forced arbitration proceedings is important.  But more must be done to ultimately scrap these one-sided clauses.

"It has become clear that Congress must step in to protect consumers against predatory forced arbitrations.  While AAA’s decision is noteworthy, it does nothing to halt nursing home, employment or any other consumer forced arbitrations, which are similarly biased and egregious.  That is why Congress should pass the Arbitration Fairness Act and prohibit this abusive practice.

"For years, these forced arbitration mills had ‘guidelines’ they either didn’t follow or outright abused.  Until Congress acts, corporations and these private forums will still be able to use one-sided forced arbitrations as a weapon against consumers and a shield to avoid accountability."

Two bills have been introduced in Congress to stem the abusive practice of forced arbitration.  The bipartisan Arbitration Fairness Act (S. 931 / H.R. 1020), sponsored by Sen. Russ Feingold (D-Wis.) and Rep. Hank Johnson (D-Ga.), would ensure that the decision to arbitrate is made voluntarily and after a dispute has arisen, so corporations cannot manipulate the arbitration system in their favor at the expense of consumers and employees.  The bipartisan Fairness in Nursing Home Arbitration Act (S. 512 / H.R. 1237), introduced by Sens. Mel Martinez (R-Fla.) and Herb Kohl (D-Wis.) and Rep. Linda Sanchez (D-Calif.), would eliminate forced arbitration clauses in nursing home contracts.

Today at 2pm, a House Oversight and Government Reform subcommittee is scheduled to hold a hearing on the use of forced arbitration in consumer debt collections. Invited to testify is the Minnesota Attorney General, the COO of NAF and an AAA representative. 

Forced arbitration clauses are hidden in the fine print of everyday consumer contracts from job applications and nursing home agreements to credit card billing inserts and mortgage loans.  To learn more, visit www.justice.org/forcedarbitration.

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