Arbitration Legislation

Jennifer Monty
July 10, 2008 — 1,337 views  
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Many creditors have grown used to court attacks on their mandatory arbitration clauses. Courts look to see if the arbitration clauses are fair to both the consumer and the creditor, and also look to the intent of the parties at the time the consumer signed the contract. At the moment, the House and Senate are further attacking mandatory arbitration clauses.
Representative Henry C. Johnson (Georgia) and Senator Russell D. Feingold (Wisconsin) in the House and Senate, respectively, introduced the Arbitration Fairness Act of 2007. Committee hearings have been held in both the House and Senate.
As introduced in the House, H.B. 3010 makes pre-dispute arbitration agreements invalid and unenforceable when they require arbitration of:

(1) An employment, consumer or franchise dispute

(2)  A dispute arising under any statute intended to protect civil rights or to regulate contracts or transactions between parties of unequal bargaining power.
H.B. 3010 will give courts the ability to determine the enforceability of an arbitration agreement, irrespective of whether the party opposing the arbitration specifically challenges the arbitration agreement. The Senate Bill, S. 1782, is nearly identical to the House Bill. 
Both bills seek to amend the Federal Arbitration Act. The Congressional Findings state that the United States Supreme Court's decisions have changed the meaning of the Federal Arbitration Act, as the act now applies to disputes between parties of "greatly disparate economic power."  The Findings also state that the arbitrators are unaccountable, and that those with consumer and economic disputes are losing their rights to a trial by a judge or jury. Finally, the Findings stated that the arbitration provisions "strip individuals of substantive statutory rights, ban class actions, and force people to arbitrate their claims." See Congressional Findings, H.B. 3010. 
Creditors sometimes favor arbitrations because of the benefits they afford, including quicker case resolutions. Other benefits may include limitations on class actions, less discovery, and a cost-effective means to try a case. Many arbitrators also have specialized knowledge or experience in the area of law that is involved in a case, while judges may come from a different or criminal background. 
In practice, Motions to Enforce Arbitration Agreements occur in both state and federal courts.  The proposed Act will only directly affect arbitrations enforced in federal courts. However, as additional states scrutinize arbitration agreements, they may look to any changes in the federal law in deciding the enforceability of arbitration agreements. 
For more information on the bill, or to read the full text, search "Arbitration Fairness Act of 2007" at

Jennifer M. Monty is an Associate in the Litigation & Defense department of the Cleveland office of Weltman, Weinberg & Reis Co., L.P.A. She can be reached at (216) 685-1136 or [email protected]

Weltman, Weinberg & Reis Co., L.P.A., celebrating over 75 years of experience, provides comprehensive collection and litigation services to creditors throughout the nation including major banks & financial institutions, mortgage & lending companies, commercial creditors, government entities, insurance companies, credit unions, service organizations, medical and utility companies.  Practice areas include bankruptcy, collection services, foreclosure/evictions/REO, legal action recovery, litigation & defense, probate, subrogation and corporate & financial services.  The firm has offices in Brooklyn Heights (OH), Chicago, Cincinnati, Cleveland, Columbus, Detroit, Grove City (OH), Philadelphia and Pittsburgh.

Jennifer Monty


Jennifer Monty works in the Litigation & Defense department in the Cleveland office of Weltman, Weinberg & Reis Co., L.P.A. Ms. Monty earned her B.A. cum laude in Communications from DePauw University (2000) and her J.D. from The Ohio State University, Michael E. Moritz College of Law (2003). A member of the Ohio State and Cleveland Metropolitan Bar Associations, Ms. Monty is licensed in Ohio and is admitted to practice before the U.S. District Court (Northern District of OH). Ms. Monty has been published in the Employee Relations Law Journal and the Pennsylvania Association of Community Bankers publication, Transactions.