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Robert Menendez

08/03/2020 | Press release | Distributed by Public on 08/03/2020 15:02

Menendez, Banking and Finance Dems Urge C4 Negotiators to Ban Arbitration Clauses Attached to Needed Benefits

Menendez, Banking and Finance Dems Urge C4 Negotiators to Ban Arbitration Clauses Attached to Needed Benefits

Menendez, Banking and Finance Dems Urge C4 Negotiators to Ban Arbitration Clauses Attached to Needed Benefits

Monday, August 3, 2020

WASHINGTON, D.C. - U.S. Senator Bob Menendez, a senior member of the both the Banking and Finance Committee, today led its Democratic members in urging lead negotiators of the next COVID-19 stimulus package to prohibit the Federal Government from attaching forced arbitration agreements to any form of benefit payments to Americans. Last March, the pre-paid debit cards IRS sent to four million Americans, loaded with CARES Act stimulus payments, also contained a little-known, anti-consumer arbitration clause tucked in its fine print.

'Americans should not be forced into signing away their rights simply to access a benefit to which they are entitled,' the Senators wrote in a letter to Mitch McConnell and Chuck Schumer. 'Given that many consumers are not even aware that arbitration clauses are included in [Economic Impact Payment] debit cards, combined with the unprecedented nature of this pandemic and the need for financial aid, we believe it is improper for the federal government to allow its contractors to include such anti-consumer clauses.'

According to a 2015 Consumer Financial Protection Bureau report, three out of four consumers surveyed did not know if they were subject to an arbitration clause. Further, because consumers are unable to join with others harmed and costs and risks cannot be distributed, many simply cannot afford to move forward.

'Arbitration clauses perpetuate a regime wholly unaccountable to consumers and the law,' they added.

Sens. Catherine Cortez Masto (D-Nev.), Elizabeth Warren (D-Mass.), Sherrod Brown (D-Ohio), Jack Reed (D-R.I.), Ron Wyden (D-Ore.), Chris Van Hollen (D-Md.) and Sheldon Whitehouse (D-R.I.) also signed today's letter.

The letter can be found here and below.

As you negotiate the next coronavirus disease (COVID-19) pandemic relief package, we urge you to prohibit arbitration clauses in any form of Economic Impact Payments (EIPs). As you know, in May 2020, the Internal Revenue Service (IRS) sent out nearly four million EIPs in the form of a prepaid debit card.[1] While we appreciate the ability of the IRS to quickly send payments to Americans in desperate need of relief, we do not think it appropriate to attach mandatory arbitration agreements to those payments.

The EIPs issued via debit cards in May 2020 managed by Money Network Financial, LLC and issued by Treasury's financial agent, Meta Bank, N.A. contained a 'legally binding' arbitration clause.[2] The clauses provided an opt-out feature requiring the cardholder to send 'a signed notice within 60 calendar days' after receipt of the card. The notice must be sent in writing to the 'Notice Address.' We believe that such an opt-out clause is inadequate as many individuals may not even be aware that this arbitration clause is tucked in the fine print, let alone that they need to take steps to opt out.

Myriad research demonstrates that arbitration clauses are a bad deal for consumers. According to one study from the Economic Policy Institute, consumers obtain relief regarding their claims in 9 percent of disputes, while arbitrators grant companies relief in 93 percent of claims.[3] A 2015 report from the Consumer Financial Protection Bureau found that three out of four consumers surveyed did not know if they were subject to an arbitration clause.[4] It's no surprise then that only a small percentage of consumers file for arbitration.[5] Moreover, because consumers are unable to join with others harmed there is no way distribute the costs and risks of an action.[6] Arbitration clauses perpetuate a regime wholly unaccountable to consumers and the law.

Given that many consumers are not even aware that arbitration clauses are included in EIP debit cards, combined with the unprecedented nature of this pandemic and the need for financial aid, we believe it is improper for the federal government to allow it contractors to include such anti-consumer clauses. Americans should not be forced into signing away their rights simply to access a benefit to which they are entitled. For this reason, we ask that you prohibit any arbitration clauses from inclusion in future EIPs. Thank you for your consideration.

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[1] https://www.forbes.com/sites/kellyphillipserb/2020/05/19/nearly-4-million-stimulus-checks-will-go-out-by-prepaid-debit-card-starting-this-week/#7c38628d3d66

[2] https://www.eipcard.com/cardholder-agreement/

[3] https://www.epi.org/publication/forced-arbitration-is-bad-for-consumers/

[4] https://www.consumerfinance.gov/about-us/blog/we-took-a-look-at-arbitration-agreements-and-heres-what-we-found/

[5] https://www.judiciary.senate.gov/imo/media/doc/Gilles%20Testimony.pdf

[6]Id.