CONYERS: Another lesson from Equifax - We must end the predatory consumer practice of forced arbitration

By John Conyres, Jr., Hank Johnson, David Cicilline, & Don Beyer

Dean of the U.S. House
of Representatives
John Conyers, Jr.

The recent Equifax data breach jeopardized the economic security of nearly half of all Americans because of the credit rating company’s failure to safeguard our most sensitive information, which could now be in the hands of criminals. To make matters worse, many of those affected by this massive security breach are unsure whether they even have legal recourse because of the company’s use of forced arbitration clauses.

Americans are right to be outraged and frustrated and should be especially concerned about the use of forced arbitration by credit rating agencies like Equifax. Forced arbitration clauses are a predatory consumer practice written into the fine print of contracts. Signers unknowingly waive their right to sue and are forced into arbitration if a dispute arises. Americans should have a right to choose whether to sue or to seek arbitration. Preemptively eliminating our access to the justice system is a violation of every American’s right as a consumer. The justice system is one of the few tools that average citizens have to fight deceitful and harmful business practices, vindicate their rights, and pursue justice.

Equifax partially revised its forced arbitration policy in response to public outcry, but a limited change is not sufficient given the systemic nature of this problem and the scope of the lives affected. In recognition of the importance of Americans’ access to justice, the Consumer Financial Protection Bureau (CFPB) finalized a rule to eliminate forced arbitration from consumer financial product contracts.

This protection restores the rights of Americans to seek their day in court, and the transparency that comes with it, if their rights are violated by unscrupulous financial services and products. This protection is vital for the economic security of the American people and our country’s commitment to the rule of law. But rather than support this commonsense protection, credit rating agencies, like Equifax, reportedly campaigned against it and spent millions in political contributions to undermine both the CFPB rule and the CFPB itself.

The Equifax data breach shook public confidence in the entire credit rating industry. Companies such as Equifax, TransUnion, and Experian should take this moment to demonstrate their respect for the rights of customers, not undermine them. This is why we wrote to ask the three credit rating agencies to revise their terms of service and eliminate their use of forced arbitration and class action waivers on all the products they offer. Furthermore, we asked that they end their opposition to the CFPB arbitration rule to restore consumers’ day in court.

Forced arbitration clauses are a bald and predatory attempt to shield corporations from liability for their misconduct through the fine print of contracts. The credit rating agencies who we trust with our most sensitive data should not be actively working to undermine consumer rights. They should support the CFPB and the rule against forced arbitration.

Congress must also step forward to protect consumer’s rights. We have led the push in the House to pass the Arbitration Fairness Act, which would eliminate forced arbitration. It deserves a vote. Unfortunately House and Senate Republicans sought a different path. A Republican measure to repeal the CFPB rule, supported by all three credit rating agencies, passed the House of Representatives in July on a nearly-straight party-line vote. It is currently pending in the Senate. We cannot afford to let it pass. The right of your and every other American’s access to the justice system is at stake.

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Rep. Johnson requests House Judiciary hearing on arbitration

WASHINGTON, D.C. – Today, Rep. Hank Johnson (GA-04) sent a letter to House Judiciary Committee Chairman Bob Goodlatte requesting a full hearing to carefully review the issue of pre-dispute (“forced”) arbitration clauses that appear in millions of consumer contracts – from employment to automobile sales and from nursing-home admission to cell phone service. 

The letter, cosigned by Judiciary Ranking Member John Conyers (D-Michigan), comes on the heels of a powerful three-part investigative series in The New York Times examining the alarming rise by corporations of including forced arbitration clauses in consumer contracts that block consumers’ access to the courts, and also their right to participate in class-action lawsuits.

According to the series, forced arbitration falls woefully short as a fair and just system for consumers seeking to hold corporations accountable when a dispute arises.

“Simply put, pre-dispute, forced arbitration deprives consumers of their day in court, and is a secretive, abusive and unfair process that favors corporations,” Johnson said. “With forced arbitration stacking the deck against the consumer, corporate overreach can’t be checked. The Seventh Amendment to the Constitution guarantees to people the right to a jury trial in a court of law before an impartial judge; in a trial that is open and fair. In stark contrast, The New York Times has resoundingly established that forced arbitration is a closed, unjust, and discriminatory system.”

Congressman Hank Johnson (GA-04) is the author of the Arbitration Fairness Act and ranking member of the House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law, which exercises jurisdiction over issues of arbitration.

U.S. Representatives Johnson and Conyers Letter to House Judiciary Chairman Goodlatte on Forced Consumer Ar...

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Conyers & Johnson Urge House to Reject Flawed Legislation that Strips Americans of their Access to Courts

(WASHINGTON) – Today, Congressman John Conyers, Jr. (D-Mich.) and Congressman Henry C. “Hank” Johnson (D-Ga.) sent a letter to the Financial Services Subcommittee on Financial Institutions and Consumer Credit in opposition to the “Bureau Arbitration Fairness Act.” The Financial Services Subcommittee on Financial Institutions and Consumer Credit considered this legislation today in a hearing entitled “Legislative Proposals to Improve Transparency and Accountability at the CFPB.” As the hearing commenced, and following transmission of the letter, Representatives Johnson and Conyers issued the following statement:

U.S. Representative
John Conyers, Jr.

“This afternoon, a Financial Services Subcommittee is considering the ‘Bureau Arbitration Fairness Act,’ legislation that would insulate the nation’s largest financial institutions from all legal recourse, even when they have violated the law. Specifically, this bill would eliminate the Consumer Financial Protection Bureau’s (CFPB) ability to prohibit or even limit the use of forced arbitration agreements in consumer financial contracts. For too long, large corporations have used these agreements to stack the deck against the individuals who sign up for student loans, credit cards, and other financial products without understanding dense language buried deep within agreements. Today we wrote the Financial Services Subcommittee with the simple message that enough is enough,” said Conyers and Johnson.

“Forced arbitration clauses strip individuals of their fundamental constitutional rights, depriving countless Americans of a fair process and a meaningful choice of how to resolve disputes with powerful financial corporations. In an effort to create actual arbitration fairness—unlike the so-called ‘Bureau Arbitration Fairness Act’—we have introduced H.R. 1844, the ‘Arbitration Fairness Act of 2013,’ that prevents the use of forced arbitration clauses in consumer, employment, and antitrust agreements.

“When the choice of arbitration is post-dispute—and therefore understandable and voluntary—arbitration is a fair process that parties choose willingly. We call on our colleagues in Congress to reject the unfortunate ‘Bureau Arbitration Fairness Act,’ that is designed intentionally to neuter the CFPB’s rulemaking authority.”

Johnson-Conyers Letter to Financial Services Bureau Arbitration Fairness Act, May 21, 2014

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