BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SJR 25|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
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THIRD READING
Bill No: SJR 25
Author: Wieckowski (D), et al.
Introduced:8/3/16
Vote: 21
SUBJECT: Arbitration: class actions
SOURCE: Author
DIGEST: This resolution urges the Consumer Financial Protection Bureau
to issue final rules protecting consumers' interests with
respect to mandatory arbitration clauses that prohibit class
actions.
ANALYSIS: This resolution makes the following legislative
findings:
1)Class actions are the only remedy for consumers who cannot
afford to seek redress alone but who can band together to stop
illegal practices.
2)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. 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.
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Page 2
3)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.
4)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.
5)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.
This resolution 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.
Background
The Bureau, through the Dodd-Frank Wall Street Reform and
Consumer Protection Act, was tasked with studying the impact of
mandatory arbitration and class action clauses. The CFPB began
the study in 2012, released those findings to Congress in March
2015 and announced their proposed rules based on the results and
requesting public comments in May 2016.
The proposed rules would impose two sets of limitations on the
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Page 3
use of pre-dispute arbitration agreements by covered providers
of consumer financial products and services.
First, it would prohibit providers from using a pre-dispute
arbitration agreement to block consumer class actions in court
and would require providers to insert language into their
arbitration agreements reflecting this limitation. This proposal
is based on the Bureau's preliminary findings - which are
consistent with the Study - that pre-dispute arbitration
agreements are being widely used to prevent consumers from
seeking relief from legal violations on a class basis, and that
consumers rarely file individual lawsuits or arbitration cases
to obtain such relief.
Second, the proposal would require providers that use
pre-dispute arbitration agreements to submit certain records
relating to arbitral proceedings to the Bureau. The Bureau
intends to use the information it collects to continue
monitoring arbitral proceedings to determine whether there are
developments that raise consumer protection concerns that may
warrant further Bureau action.
Comments
Purpose. According to the, "This resolution encourages the CFPB
to move forward with making their proposed rules the law. These
rules will result in protecting consumer's rights to band
together in order to pursue justice and deter unethical business
practices that they are unable to do individually."
FISCAL EFFECT: Appropriation: No Fiscal
Com.:NoLocal: No
SUPPORT: (Verified8/10/16)
California Alliance for Retired Americans
California Rural Legal Assistance Foundation
California Public Interest Research Group
Center for Public Interest Law
California Teamsters Public Affairs Council
SJR 25
Page 4
Consumer Action
Consumer Attorneys of California
Consumers for Auto Reliability & Safety
Consumer Federation of CA
Consumer Watchdog
Consumers Union
Courage California
East Bay Community Law Center
Housing and Economic Rights Advocates
Privacy Rights Clearinghouse
Public Good
SEIU
The Utility Reform Network
OPPOSITION: (Verified8/10/16)
Civil Justice Association of California
Prepared by: Jonas Austin / SFA / (916) 651-1520
8/10/16 15:40:27
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