What are Forced Arbitration Clauses? And Why are VA Legislators Concerned About Their Use?
Wednesday, January 23rd, 2019
Many companies tuck forced arbitration clauses into their terms and conditions. They are in hundreds of millions of consumers contracts: car loans, credit cards, checking accounts, insurance, investing accounts, student loans, and even certain employment and nursing home agreements. You can be legally bound to forced arbitration by signing a contract or clicking “I agree” on a website. These clauses deny Americans their day in court, instead forcing them into secretive arbitration proceedings, which are often heavily weighted in the companies’ favor.
A bill introduced by Delegate Debra Rodman, HB 2236, will restrict the use of forced arbitration clauses and other contract clauses that are designed to restrict students rights (including rules to prevent students from complaining about the school) in student college enrollment contracts. A 2016 study by the Century Foundation found that “while these types of restrictions were frequently imposed by for-profit colleges participating in the federal financial aid program, they were used only rarely at traditional nonprofit colleges or at for-profit colleges not using federal funds, and almost never at public institutions . . . A growing number of students, including military servicemembers, have also been defrauded by for-profit colleges such as ITT, DeVry and Corinthian Colleges, which have made deceptive claims about job placement rates, abruptly closed, or left students with a pile of debt for a worthless degree.” Delegate Rodman’s legislation will help these students make complaints and have access to the judicial system when they are defrauded.
A bill introduced by Delegate Karrie Delaney, HB 1820, restricts the use of forced arbitration clauses in employment contracts. Specifically, the bill makes any provision of a forced arbitration agreement that “has the purpose or effect of concealing the details relating to a claim of sexual harassment or of sexual assault” unenforceable.
After years of exhaustive study, the Consumer Financial Protection Bureau attempted to enact an Arbitration Rule to address some of the problems of forced arbitration, but the U.S. Senate struck down the rule in 2017. These two bills before the 2019 General Assembly are needed to address some of the worst abuses of forced arbitration clauses, especially since the federal government refuses to take any action.