Washington, DC – Today, U.S. Rep. Bill Foster (D-IL) and U.S. Sen. Jeff Merkley introduced the Investor Choice Act, which would prohibit pre-dispute mandatory (or “forced”) arbitration agreements and ban prohibitions on class action lawsuits in customer contracts that investors often must enter into in order to receive services from broker-dealers or investment advisers.
The bill is cosponsored in the House by Reps. Carolyn Maloney (D-NY), Sean Casten (D-IL), Gregory Meeks (D-NY), Stephen Lynch (D-MA), Jim McGovern (D-MA), and Jan Schakowsky (D-IL).
In the Senate, the legislation is cosponsored by Sens. Dick Durbin (D-IL), Richard Blumenthal (D-CT), Elizabeth Warren (D-MA), Bob Menendez (D-NJ), and Sheldon Whitehouse (D-RI).
Pre-dispute mandatory arbitration contracts require investors to submit to arbitration if they have been wronged, surrendering their right to seek recourse in a court or in front of a jury. This particularly harms investors who do not have the leverage to negotiate standard take-it-or-leave-it contracts. Moreover, class action prohibitions hurt investors by deterring claims that may not be economically feasible to litigate individually, but address a harm experienced by many investors. The Investor Choice Act would restore these legal protections for investors.
“Individuals shouldn’t be forced to surrender their legal rights because they choose to work with a financial advisor or broker dealer to plan for their retirement and invest their hard earned money,” said Congressman Foster “This legislation levels the playing field for consumers and prevents them from being victims of a rigged system that denies them fair legal recourse if they are wronged. I’m proud to work with Senator Merkley on this important legislation for American consumers.”
“Every consumer deserves a fair shot at justice when wronged,” said Senator Jeff Merkley. “But when an investment advisor or broker chooses the judge, pays the judge, and promises future business to the judge, you know that the system is rigged against you. Let’s restore justice and pass this bill.”
“Strong protections for Main Street investors are critical.” said Congressman Casten. “When you are trying to save for your child’s education or for your own retirement, you should not be forced to waive your right to seek a jury trial when a dispute arises. Working families must be empowered to save for their futures and fully advocate for themselves if they are wronged. This bill does just that.”
“Forced arbitration prevents people from seeking justice in court if they are wronged by a financial advisor or broker-dealer. Our bill restores an individual’s right to fair legal processes if they have been victimized. This commonsense legislation will help strengthen our securities markets and protect investments made by working families,” Senator Durbin said.
“Forcing investors, including families saving for retirement, to sign away their rights to go to court if they get cheated is just one more way to stack the deck against working families and let big corporations escape accountability,” said Senator Warren. “I want to get rid of forced-arbitration agreements entirely, but we can start by passing the Investor Choice Act so that investors aren’t pressured into them.”
“Americans shouldn’t have to sign away their legal rights in order to plan for their financial future,” said Senator Blumenthal.
A copy of the House bill is available here.
A copy of the Senate bill is available here.