June 16, 2016

Assembly Passes Several Measures to Protect New Yorkers' Rights in Consumer Contracts

Assembly Speaker Carl Heastie, Consumer Protections Committee Chair Jeffrey Dinowitz, Judiciary Committee Chair Helene Weinstein, Assemblymember Matthew Titone and Assemblymember Aravella Simotas announced the passage of legislation to require more transparent disclosure of mandatory arbitration clauses in consumer and employment contracts.

"The Assembly believes in the right of consumers and workers to have unobstructed access to the protections afforded to them under the law," said Speaker Heastie. "It is important that we advance policies that ensure New Yorkers are always aware of their rights especially in circumstances when they are making a decision that would waive these protections."

In recent years, the use of mandatory arbitration clauses in consumer financial and employment contracts has increased significantly. Unfortunately, these clauses are often buried among dense layers of terms consumers are required to accept as a condition of employment or purchase of consumer goods or services. The clauses generally mandate that any consumer disputes that may arise must be pursued and resolved through third party arbitration instead of an individual or class action. As a result, thousands of consumers unknowingly waive their legal right to bring an action in a court of law for legitimate labor violations, erroneous charges or other grievances.

Among the measures passed was a bill that would prohibit contracts for consumer goods and services from limiting consumers to arbitration or litigation of disputes in counties which are grossly inconvenient to the consumer (A.9995, Weinstein). In addition, legislation passed earlier this month would require arbitrators to follow existing law by allowing an award to be voided if the arbitrator disregarded established law (A.9993, Weinstein). Currently, arbitrators are not required to follow well-established law in deciding matters.

"Imposing mandatory arbitration on consumers, without a fair process, essentially eliminates any remedy for consumers who may have been wronged or defrauded and it denies people their day in court," said Assemblymember Weinstein. "The costs of arbitrations for an individual consumer are often unaffordable, as compared to the amount of money in dispute. Those who are able to go through arbitration often find that the arbitration panels are stacked against them. While arbitration can be a useful tool to settle disputes, it should be a fairer process that does not disregard basic standards of law. The bills we have passed would strengthen existing law and establish procedural changes to make the process more equitable for consumers."

Other bills would: require mandatory arbitration clauses in certain consumer contracts to be printed in large font (A.9544, Dinowitz), and to provide that when a consumer is being required to accept a mandatory arbitration clause as part of a contract, companies or their representatives must explain to the consumer in plain language what the clause means (A.9545, Dinowitz).

"We cannot allow consumers to be silenced and their rights violated by the preemptive use of mandatory arbitration clauses," said Assemblymember Dinowitz. "When well-armed corporations and unscrupulous employers hide their wrongdoing behind the threat of costly and time-consuming arbitrations, we send the wrong message to New Yorkers. These bills will go a long way to bring transparency into consumer contracts and mandatory arbitration proceedings while ensuring that the hard working people of this state are informed, and their rights protected."

The Assembly also passed legislation earlier in the session that would require arbitrators to explain the basis for their awards (A.10090, Titone), such that participants would know whether they possessed any meaningful right to challenge the award.

"Taking steps to ensure that consumers understand the contracts they are given and often required to agree to is one of the most basic protections we can afford the people of this state," said Assemblymember Titone. "Too often, forced arbitration places people at a costly disadvantage without access to the information they need to ensure they are being treated fairly. These measures are necessary to provide clarity and transparency around these proceedings."

Another bill that was approved would adopt recommendations from the National Consumer Law Center which would give consumers the ability to seek modification of onerous one-sided contract terms in court (A.9991, Simotas).

"My bill is quite simply a way to bring transparency into the world of consumer and employment contracts," said Assemblymember Simotas. "It is imperative that New Yorkers be fully informed and not kept in the dark, when they sign contracts. The bill requires plain language and conspicuous disclosure of terms, like mandatory arbitration, which can deprive consumers and workers of their right to choose a course of action when they've been aggrieved."