Senate Joint Resolution No. 25

Introduced by Senator Wieckowski

(Coauthors: Senators Jackson and Leno)

(Coauthor: Assembly Member Mark Stone)

August 3, 2016

Senate Joint Resolution No. 25—Relative to mandatory arbitration clauses.

LEGISLATIVE COUNSEL’S DIGEST

SJR 25, as introduced, Wieckowski. Arbitration: class actions.

This measure would urge the Consumer Financial Protection Bureau to issue final rules protecting consumers’ interests with respect to mandatory arbitration clauses that prohibit class actions.

Fiscal committee: no.

WHEREAS, Class actions are the only remedy for consumers
who cannot afford to seek redress alone but who can band together
to stop illegal practices; and

WHEREAS, Contract language that bans consumers from
joining class actions prevents consumers from exercising strength
in numbers and allows corporations to pilfer small amounts of
money from millions of individuals who cannot band together to
stop that practice; and

WHEREAS, Bans against class actions are substantively
unconscionable because they are one-sided--only consumers bring
claims against corporations through class actions, not the other
way around; and

WHEREAS, Bans against class actions are procedurally
unconscionable because consumer contracts barring class actions
are “take-it-or-leave-it” contracts that prohibit consumers from
negotiating contract terms, effectively leaving consumers to choose
between access to modern goods and services and access to justice;
and

WHEREAS, In the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010, Congress authorized the
Consumer Financial Protection Bureau (the Bureau) to study
mandatory arbitration clauses in consumer contracts and to issue
regulations restricting or prohibiting their use if the Bureau found
that such regulations would be in the public interest and protect
consumers; and

WHEREAS, The Bureau found that nearly all contracts
containing mandatory arbitration clauses not only barred consumers
from participating in future class action lawsuits, but also specified
that any resulting arbitration proceeding could only be conducted
on an individual, not a class, basis; and

WHEREAS, Accordingly, the Bureau has proposed a rule that
would prohibit contracts for financial products or services from
containing mandatory arbitration clauses barring consumers from
filing or participating in a class action relating to the financial
product or service; and

WHEREAS, This proposed rule is based on a finding that
mandatory arbitration clauses are being widely used to prevent
consumers from seeking relief from legal violations on a class
basis and that consumers rarely seek redress as individuals; and

WHEREAS, Class actions deter violations from occurring and
redress violations of consumers’ rights when they do occur; and

WHEREAS, Without class actions, corporations that engage in
illegal practices will effectively remain unpunished, undeterred,
and unaccountable; now, therefore, be it

Resolved by the Senate and the Assembly of the State of
California, jointly, That the Legislature of the State of California
encourages the Bureau to move forward in issuing final rules,
either as proposed or in an amended form that even more
stringently protects the right of consumers to pursue justice and
relief and deters companies from violating the law; and be it further

Resolved, That the Secretary of the Senate transmit copies of
this resolution to the author for appropriate distribution.