FCC To Propose Rules That Could Restore Consumers’ Right To Sue Phone, Broadband Providers

While the big headline of this morning’s monthly FCC meeting was the release of the Commission’s final rules on broadband privacy, the agency’s leadership also let it be known that it’s planning to take on one of the industry’s most controversial issues: The right of consumers to have their day in court.

As we showed you earlier this year, all of the major wireless, landline, and broadband companies now have clauses in their user agreements that force most customers’ lawsuits out of the courtroom and into binding arbitration.

Additionally, these contract terms generally bar customers from joining together with other similarly wronged individuals into a class action — even in arbitration — meaning each single customer must bring their own case.

In fact, it was the wireless industry that paved the way for these gotcha clauses, with the 2011 Supreme Court Ruling in AT&T Mobility v. Concepcion that the law does allow for companies to insert these clauses into lengthy user agreements, even after a customer has signed up with the company and even though the customer often has no authority to negotiate or alter these terms.

Lawmakers have tried to restore these rights through legislation, but to no avail so far.

Federal regulators have just recently begun to push back against forced arbitration. In September, the Center for Medicare & Medicaid Services issued a revised rule stating that long-term care facilities that participate in these programs must stop automatically forcing new residents into arbitration (the rule does not apply to existing contracts). A few weeks later, the nursing home industry filed a lawsuit seeking to stop the rule from being enforced.

Similarly, the Department of Education is slated to release its own rule regarding the use of forced arbitration in enrollment agreements. A recent survey found that these clauses are predominantly used at for-profit colleges and professional training schools.

Meanwhile, the Consumer Financial Protection Bureau has been working on the issue of arbitration for years, releasing a proposal for new rules in May.

At the same time, bank-backed lawmakers in Congress have continued to throw up roadblocks to slow down or stop the CFPB’s arbitration rule. Most recently, in July the House passed an appropriations bill that would forbid the Bureau from using any of its funding “to regulate pre-dispute arbitration agreements.” Additionally, any rule the CFPB does come up with can’t be enforced until the Bureau does additional research, meaning it would effectively have to repeat its three-year study on the issue.

During this morning’s FCC meeting, Commissioner Mignon Clyburn argued that the new privacy rule was a missed opportunity to address the arbitration issue.

“I am disappointed that we did not join this vanguard in ensuring consumers are not unwittingly giving up their day in court when they sign up for communication services,” said Clyburn.

However, FCC Chair Tom Wheeler did reveal that forced arbitration is going to be addressed through a separate rule, which he intends to propose by Feb. 2017.

What exactly that rule will entail is still unknown, but the mere announcement of a forthcoming proposal has some anti-arbitration folks optimistic.

“This is huge news for nearly every American who signs a television, internet, or phone contract,” said Sen. Al Franken (MN), who has been an outspoken critic of forced arbitration and has previously introduced legislation aimed at revising the nearly century-old arbitration law. “For decades, big corporations have locked the courtroom doors on their customers by slipping mandatory forced arbitration clauses into contracts… I believe if you’re wronged, you should be able to seek justice in our legal system. We’ve seen a lot of good steps recently to tackle forced arbitration, and this one could be a true game changer.”

In a statement, Sen. Patrick Leahy (VT), ranking member of the Senate Judiciary Committee says he is encouraged by today’s news.

“The evidence of the profound negative impacts of forced arbitration for consumers continues to mount,” said the senator. “Forcing people into a shadow justice system without transparency must not be tolerated.”