February 17, 2020

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Arbitration Under Attack: New Bill Aims To Curb Contractual Rights To Arbitration.

By their very nature, many Telephone Consumer Protection Act (TCPA) suits end up in arbitration, particularly when a bank or other financial institution is involved. This serves benefits for both the consumers and the businesses subject to them. It allows a faster, more streamlined mode of resolution, ideally by an arbitrator with knowledge of the TCPA, ensuring a fair and efficient for all involved. But a bill introduced a few days ago in the House of Representatives seeks to prohibit predispute consumer arbitration agreements. See H.R. 1423.

Titled the “Forced Arbitration Injustice Repeal Act,” or FAIR, the bill is anything but “fair.” It would ban predispute arbitration agreements for employment, consumer, antitrust, and civil rights disputes. It is therefore even broader than the CFPB’s arbitration rule, which was narrowly voided by the Senate.

FAIR purports to be aimed at “forced” arbitration, but arbitration is, of course, not forced at all. Instead, it is part of a bilateral agreement that both parties agree to by contract. FAIR would, therefore, prohibit parties from entering into voluntary contracts; it would not eliminate any “forced” proceedings.

Aside from eliminating arbitration in consumer agreements, eliminating arbitration has the potential to open the floodgates to even more abusive class action litigation, both in TCPAWorld and in other consume protection statutes. That is because the main mechanism to enforce class action waivers is Federal Arbitration Act preemption of state laws that prohibit class action waivers. If an arbitration agreement is not enforceable, however, FAA preemption does not apply, and state law prohibitions on class action waivers are arguably enforceable.

Any company that contracts regularly with consumers will want to monitor FAIR closely. With the bill already having over 220 cosponsors, it has a very real chance of passing. If you are concerned about how it could impact your business or your contractual rights, give us a call. We have several people with expertise navigating Congress who would be happy to help.

© Copyright 2020 Squire Patton Boggs (US) LLP


About this Author

Daniel Delnero specializes in representing companies facing high-stakes consumer class action litigation, with a particular emphasis on consumer financial services matters. He has successfully represented clients in large, complex matters, including the Telephone Consumer Protection Act (TCPA), Fair Debt Collection Practices Act (FDCPA), mergers and acquisitions litigation, First Amendment litigation, libel and defamation, contract disputes and business torts. Daniel also routinely represents companies and individuals facing intrusive governmental investigations,...

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