Hillary Clinton Calls for an End to Forced Arbitration Clauses
by Steve Ralls
Director of Communications
In a speech this afternoon in Toledo, Ohio, presidential candidate Hillary Clinton called for an end to forced arbitration clauses that are increasingly used by corporations to keep consumers, and workers, out of court. During her speech, Secretary Clinton specifically referenced the clause Wells Fargo customers are bound by:
“We saw one of our country’s biggest banks, Wells Fargo, bully thousands of employees into committing fraud on unsuspecting customers,” the campaign said in a statement, vowing to restrict practices that “businesses like Wells Fargo have used to lock the consumers they’ve harmed out of court.”
Clinton said today she would also order federal government agencies – including the Consumer Financial Protection Bureau, which has proposed a rule to prohibit some forced arbitration clauses – to use their authority to curb their use. Public Justice’s executive director, Paul Bland, recently told Consumer Reports that, “If the CFPB rule was in place five years ago, Wells Fargo customers would have been able to file a class action lawsuit, which would have stopped what was happening a long time ago.”
Clinton’s proposals follow language approved as part of the 2016 Democratic platform which also called for ending the use of forced arbitration clauses.
Here’s an excerpt of the proposal released today by Secretary Clinton:
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.
As HuffingtonPost noted immediately after the Wells Fargo story broke, Public Justice recently warned lawmakers how vulnerable bank customers, in particular, are:
“If a bank systematically cheated 10,000 customers in the same way, the bank could use its arbitration clause to stop those customers from going to court together,” Bland wrote in testimony before the House Financial Services Committee earlier this year. “Each individual had to figure out the scam, figure out what their rights were and then spend time and money fighting the bank. In the incredibly inefficient system that banks foisted on their own customers, everyone was essentially on their own. In contrast, a class action could offer all 10,000 people a fair shot at justice.”
Yet, as HuffingtonPost reported, “Banks, desperate for revenue, are getting more aggressive in marketing and selling services to their customers, and the chances for malfeasance are high.”
Today’s proposal from Secretary Clinton – a first for a presidential campaign – is welcome news for consumers, workers and all those fighting to keep our courts open, and working, for everyone.