Senator Franken introduces Arbitration Fairness Act to protect consumers’ rights

May 19, 2011 by Todd Murray · Leave a Comment 

A group of U.S. Congressmen, including Minnesota’s Al Franken, introduced a new bill that would eliminate forced arbitration clauses in employment, consumer, and civil rights contracts. The impetus behind the proposed law appears to be the recent U.S. Supreme Court decision in AT&T v. Concepcion. In Concepcion, consumers sued AT&T for false advertising. Because the value of their case was only $30, it was consolidated into a class action. AT&T tried to stop the lawsuit by activating the mandatory arbitration clause in the service contract, which not only required the case to be heard in a behind-closed-doors private arbitration forum, but also banned class actions altogether. This contractual language was buried in the fine print of the consumers’ contract and, like most consumer contracts, was not negotiable and offered on a take-it-or-leave-it basis. Both lower courts rejected AT&T’s argument and struck down the arbitration clause in the contract as unconscionable because it severely limited the consumers’ rights.

In an already notorious 5-4 decision, the U.S. Supreme Court struck down these lower court decisions. The Court applied the Federal Arbitration Act to uphold the contractual ban on class actions and forced arbitration. Although the FAA was originally passed to ensure that courts enforced commercial arbitration agreements between two companies, the Court’s decision expands the scope of the FAA and effectively allows companies to insulate themselves from liability when they defraud a large number of customers of a relatively small amount of money.

Because the Court’s decision involved interpretation of a federal statute and not the Constitution, it can essentially be overturned through legislation, which is where Franken’s bill comes in. From the press release:

What the Arbitration Fairness Act Does:

  • Restores the original intent of the FAA by clarifying the scope of its application.
  • Amends the FAA by adding a new chapter invalidating agreements that require the arbitration of employment, consumer, or civil rights disputes made before the dispute arises.
  • Restores the rights of workers and consumers to seek justice in our courts.
  • Ensures transparency in civil litigation.
  • Protects the integrity of the Civil Rights Act, the Equal Pay Act, the Americans with Disabilities Act, and the Age Discrimination in Employment Act, among others.

“Workers and consumers should never be forced to give up their rights to get hired for a job, or to get a cell phone,” said Senator Franken.“I’ve introduced the Arbitration Fairness Act to ensure that workers and consumers have the right to choose arbitration over litigation, instead of being forced into it by corporations.”

Press Release | May 17, 2011

FTC heeds Franken’s call for review of debtors being thrown in jail

July 19, 2010 by Todd Murray · Leave a Comment 

Last week, Minnesota Senator Al Franken issued a press release calling for a review of the practices and procedures that are causing increasing numbers of consumers to be thrown in jail in debt collection cases. Here’s the press release:

WASHINGTON, D.C. [07/15/10] – U.S. Sen. Al Franken (D-Minn.) called on Federal Trade Commission Chairman Jon Leibowitz to take immediate action to address possible illegal activities by debt collection firms in Minnesota and across the country.

“Right now, Minnesotans are struggling to make ends meet. The last thing they need is to become victims of debt collection abuse,” said Sen. Franken. “Recent reports raise serious questions about whether our current laws go far enough to protect consumers, and I want to make sure Minnesotans aren’t at risk of being harassed or improperly jailed.”

Recently the Minneapolis Star Tribune published two articles detailing the disturbing practices of some debt collection agencies in Minnesota. The article cites a sharp rise in the use of arrest warrants against debtors, resulting in an increasing number of Minnesotans finding themselves behind bars for old or minor debts. The paper attributes the rise in arrests to the growing debt-buying industry that profits from buying people’s debts and the poor economy. Agencies can then use the court system to collect debts, as bail is frequently set at the amount the debtor owes.

The Star Tribune also discovered that Minnesotans are more frequently finding themselves pursued by debt collection agencies for debts that they don’t actually owe or debts that they already paid.

Sen. Franken’s letter to Chairman Leibowitz can be read here.

You can read the Star Tribune’s articles, “In Jail for Being in Debt,” and “Phantom Debts, Real Anguish” on their website.

In response to Franken’s letter, the Federal Trade Commission has agreed to take a harder look at the process for potential abuse.

“We’re trying to identify what the practices are, under what conditions people who may have consumer debt collection claims against them may be jailed, and whether such practices are in conformity with federal law,” said Julie Bush, a staff attorney in the FTC’s division of financial practices. She said the inquiry was not a formal investigation.

Bravo to Chris Serres at the StarTribune, who’s excellent article has been the catalyst for political action (or at least lip service about political action).