New Bill Could Stop Cable & Phone Companies From Taking Away Customers’ Right To Sue

Five years ago today, the U.S. Supreme Court sided with AT&T, ruling that companies could use a couple paragraphs of legalese buried deep in unchangeable user agreements to strip customers of their right to file a lawsuit. An upcoming piece of legislation seeks to restore that right for telecom customers.

Consumerist has confirmed that Senators Richard Blumenthal (CT) and Al Franken (MN) recently circulated a letter to their colleagues, seeking co-sponsors for their upcoming bill — the Justice for Telecommunications Consumers Act — that would prohibit phone companies, pay-TV providers, broadband services, and others from including mandatory arbitration clauses in their terms of use with consumers.

Arbitration clauses force customers to resolve disputes outside of the legal system in a binding process overseen by a third-party arbitrator.

It’s a process that, for a long time following the enactment of the 1925 Federal Arbitration Act, was largely used as a way to expedite contract disputes between companies.

However, as we recently detailed, multiple Supreme Court decisions over the last four decades have made the use of arbitration clauses more attractive as a method for restricting consumers’ access to the legal system.

Because of these rulings, forced arbitration now applies to lawsuits filed in both federal and state courts; arbitration clauses can be used to prevent consumers from resolving disputes together as a class, even through arbitration, and even if a class action is the only possible way to prove their case; and arbitrators’ decisions are final, even in situations where an obvious legal error was made that would have changed the outcome.

And while defenders of arbitration clauses argue that they are a fast and easy way to resolve disputes, the numbers indicate that companies tend to use these clauses to primarily shut down class actions.

As noted in the letter sent by Blumenthal and Franken, companies allow most lawsuits involving dollar amounts under $2,500 to be heard in court rather than shunt them off into the arbitration process.

The issue of arbitration is particularly worrisome for the telecom industry because not only do almost all telecom providers use these clauses, but these same companies “have been accused of a plethora of consumer protection law violations, including unauthorized charges, fraud, and false advertising.”

Some companies have begun highlighting their arbitration clauses by putting notes at the top of their user agreements, but the senators note that this is ultimately pointless.

“[E]ven if the clauses were in bold letters, it would make little difference,” explains the letter. “For one, these are adhesion clauses — customers cannot negotiate the terms. Second, customers cannot refuse and sign up with a company that preserves their rights because virtually all telecommunications companies use arbitration agreements.”

The legislation — expected to be introduced tomorrow — would not outlaw the use of arbitration. If a customer and a telecom company both choose to resolve a dispute outside of the courtroom, that would be their choice. It merely seeks to restore the ability to make that choice for hundreds of millions of American consumers.

“Arbitration can be a useful tool,” the senators acknowledge, “but these clauses are predatory and serve to benefit corporations at the expense of consumer rights.”