Congress does not have the reputation lately of working for the people. Stalemates between Republicans and Democrats continue to halt progress in both bodies of Congress. However, amidst their inability to seemingly get anything done, 37 members of the Senate and House of Representatives have penned a letter to the Securities and Exchange Commission (“SEC”) asking for it to use its power to enforce consumer rights.
The letter, sent to SEC Chairman Mary Jo White, asks the SEC to end arbitration mandates that Wall Street and other securities firms are including more frequently in their terms of service. It’s a trend most large corporations are making these days. PayPal did so in November 2012. Charles Schwab & Co., Inc., one of the nation’s largest brokerage houses is currently battling with the Financial Industry Regulatory Authority over amendments it made to customer agreements in September 2011 which included a class action waiver.
As we have stated time and time again on this blog, mandatory binding arbitration clauses restrict consumer rights by banning them from forming a class and taking their issue to court. Instead, a consumer must pursue their claims individually in front of arbitrator, who more often than not is chosen by the very company the consumer is suing. The letter emphasizes the importance of forum choice to the markets.
“Ensuring a choice of forum, particularly small investors, heightens fairness and ultimately enhances participation in our capital markets. We are deeply concerned that the Commission’s failure to respond to the dangers posed by widespread forced arbitration will weaken existing investor protections.”
The letter asks for the SEC to exercise its authority under Section 921 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Section 921 of the 2010 act amends the Securities Exchange Act of 1934 and authorizes the SEC to prohibit the use of arbitration agreements by brokers, dealers or municipal securities dealers. The SEC has yet to exercise its rights under this provision.
Twenty-four members of Congress attached their names to this letter. However, given that none of them are Republicans, it seems Congress is still far from achieving any sort of bipartisanship.