Consumer & Worker Safeguards

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A Majority of Voters Support Passage of Legislation to End Forced Arbitration

Late last week, Rep. Hank Johnson (D-GA) and Sen. Richard Blumenthal (D-CT) introduced the Forced Arbitration Injustice Repeal (“FAIR”) Act, a bill that would end the harmful use of forced arbitration against workers, consumers, and small businesses.

Forced arbitration clauses, which are usually hidden in the fine print of “take-it-or-leave-it” agreements, are ubiquitous in contracts governing bank accounts, student loans, cell phones, employment, small business merchant accounts, and even nursing home admissions. These clauses deprive people of their right to seek justice in court before an impartial judge or jury.

The FAIR Act would not eliminate the option of allowing workers, consumers, and small businesses from agreeing to arbitration or other forms of alternative dispute resolution after a dispute has occurred. Rather, it would give them back the power to choose how they want to resolve a dispute.

The FAIR Act would correct a series of recent U.S. Supreme Court decisions that have expanded the reach of the Federal Arbitration Act much farther than Congress intended, and have given corporations greater power to force workers and consumers into arbitration. Arbitration has been used as a tool by big corporations to deprive workers and consumers of their rights and is inherently unfair. The proceedings are generally secret, may be biased in favor of the company because they tend to bring in repeat business, and include few rights to appeal. The arbitration rules could even include “loser pays” provisions, which deter people from bringing valid claims for fear that they will have to pay the opposing party if they lose the case.

Workers across the country are increasingly demanding that their companies remove these clauses from employment contracts. In late 2018, thousands of Google employees protested the company’s forced arbitration policy for sexual harassment and other mistreatment claims. Shortly after the employee walk-outs, Google announced that it would no longer force workers into arbitration for claims related to sexual harassment. Similar companies such as Facebook, Airbnb, and eBay announced similar plans. And, after continued advocacy by a broad coalition of organizations led by Public Citizen, Google announced last month that it would no longer force its workers into arbitration for any type of claim (although it still does require contract workers to bring claims in arbitration).

Public Citizen and dozens of consumer, worker, and civil rights organizations join a majority of both Democrats and Republicans in calling on Congress to quickly pass the FAIR ACT. According to a national survey, 84 % of the public supports federal legislation that ends the practice of forcing consumers and workers into arbitration. Surprisingly, Republicans support the legislation more than Democrats (87% to 83%).

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The Wall Street Tax Act Would Crack Down on Dangerous High-Speed Trading and Reduce Inequality

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Taxing millionaires and billionaires in order to fund ambitious programs for a more just society with less inequality has been a hot issue in recent weeks. Between high-profile proposals such as Sen. Warren’s proposed wealth tax and Rep. Ocasio-Cortez’s plan to substantially raise the top marginal tax rate, high-profile proposals to correct our unjust inequality have been getting plenty of media attention and have been the topic of much public debate.

Part of the reason for for that is that the list of problems that need tackling in this nation seems to grow by the minute: teachers are protesting the lack of adequate funding in their schools, children are facing the threat of unsafe drinking water and roads in such disrepair potholes are damaging vehicles. Federal tax dollars can and should be part of the solution to addressing these and other obstacles facing Americans and to minimizing economic inequality everywhere. That’s why it’s fantastic to see the huge amount of public support for policies that would sharply increase taxes on millionaires and billionaires. We should be thinking big when it comes to these proposals.

But unrigging the tax system means more than taxing the superrich or undoing the corporate giveaways in the 2017 tax law. The tax debate also must focus on making Wall Street high rollers pay their fair share by putting a sales tax on financial transactions like stock, bond and derivative trades. That’s why Public Citizen applauds Sen. Brian Schatz (D-Hawaii) and Sen. Chris Van Hollen (D-Md.) as well as Rep. Peter DeFazio (D-Ore.) and Rep. Alexandria Ocasio-Cortez and colleagues for today introducing the Wall Street Tax Act of 2019. This brand new legislation proposes a financial transaction tax (FTT) that would apply a 0.1 percent fee (10 cents out of every $100) on the trading of stocks, bonds and derivatives. We were joined by 60 other organizations from faith to labor to climate groups that endorsed the Wall Street Tax Act legislation introduced today.

Passing the Wall Street Tax Act would have the dual benefits of raising revenue to pay for the kinds of ambitious programs we need to create a more just society, and also curbing bad behavior on Wall Street. Specifically, the bad behavior that an FTT would check is high-speed trading.

High-frequency trading is the superfast computer trading that has overtaken the market. It was high-speed trading that contributed to the market instability we have seen over the past few months. Because the profit from high-speed trading comes from being able to make trades a split second faster than the competition, putting a tiny tax on trading will steer activity away from these investment strategies that narrowly chase short-term gains over long-term value creation.

In addition to cracking down on this dangerous high-speed trading, the proposal’s revenue generation is nothing to sneeze at either. According to government estimates, it would raise nearly $777 billion over 10 years. After being in place for a few years, a Wall Street tax at a rate of 0.1 percent would bring in more than $100 billion per year. In one year, that could pay for more than a million teaching, clean energy or infrastructure jobs. It could fund a year of more than 11 million Head Start spaces, health care for more than 42 million low-income kids, or health care for 9 million veterans. Or, that amount could pay the way to four-year colleges for more than 3 million students. Moreover, it could be put toward mitigating climate change or investing in rebuilding the infrastructure our society desperately needs. The list of possible investments is endless.

Given the many benefits from taxing financial transactions, it’s not surprising that around 40 other countries have them in place. In fact, the U.S. already has an (albeit very small) trading fee in place that funds some of the operations of the U.S. Securities and Exchange Commission. This would just put in place a more robust, expanded version of an existing tax.

It was more than a decade ago when Wall Street recklessness crashed the economy, but some hardworking families are still struggling to regain their footing. Yet banks are making record profits and cashing in from the generous tax cuts they received—all while buying back their own stock.

Standing up to the financial industry will take vision and commitment. Hopefully, all members of Congress will see the potential and join Sen. Schatz, Sen. Van Hollen, Rep. DeFazio, Rep. Ocasio-Cortez and their colleagues in calling to use Wall Street’s dime to rebuild Main Street.

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Caught in the Crosshairs of Corporate Power: How Americans are Harmed When They Lack a Voice in Washington

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This is part one of a five part series.

When political candidates spend their time begging for cash from wealthy interests and legislating to prioritize private profits over the public good, regular people lose out. The corporations and superrich donors that dominate our elections have an outsized influence over who wins, what gets discussed in campaigns and what legislative ideas receive serious consideration.

The sweeping legislative package known as the For the People Act (H.R. 1) contains ethics, campaign finance and voting rights reforms that are essential to make our government work effectively and fairly. The legislation would enact:

Comprehensive campaign finance reforms to end dark money and reduce the power of corporations and the wealthy to influence our elections. Under the bill, elected officials would be able to finance their campaigns from individual donations, with a match from the federal government.

Desperately-needed government ethics reforms to combat conflicts of interest by slowing the revolving door between public service and powerful business interests and strengthened oversight and enforcement of ethics laws and rules.

Voting and electoral reforms that would end gerrymandering, knock down barriers to voting and reaffirm the principle of one person, one vote.

Since Donald Trump’s election, corporate America has had a field day in Washington. Regulatory rollbacks and plummeting enforcement against corporate violators are leaving Americans more exposed than ever to profit-seeking predators. Meanwhile, massive tax cuts are allowing industry to get away without paying its fair share, and our meager social safety net programs have faced constant legislative threats.

To illustrate the need for reforms that reduce corporate influence and redistribute power to the people, Public Citizen compiled stories of five regular Americans whose lives have been impacted by corporate political power.

Corporate Power Spotlight: Higher Education

“It’s just one thing after another to hurt students.”

– Sanders Fabares, 39, San Diego

In 2003, Sanders Fabares was seeking to break into the film industry and wanted to get trained on how to use digital video production equipment. While looking at job ads, he saw an advertisement for an open house and barbecue event at the Art Institutes of California in San Diego.

At the time, he had limited knowledge of for-profit colleges. But after taking a tour, Fabares was impressed by the school’s sophisticated cameras and video equipment. A school’s recruiter boasted of a 95 percent job-placement rate, and pushed him aggressively to enroll, he said.

The job-placement rate was the main reason Fabares enrolled in the Art Institutes program, never considering that a school might not be truthful about such an important statistic. But the school’s former parent company, the now-bankrupt Education Management Corp., owned by Goldman Sachs and two private equity firms, later faced allegations of overly aggressive recruiting practices and exaggerating job-placement rates. The schools’ new owner has been closing down campuses.

Fabares found the Art Institutes program to be almost worthless, especially compared with the University of Arizona, where he had already studied to get a bachelor’s’ degree. With a high ratio of students to teachers, Fabares found it incredibly difficult to enroll in the classes he needed.

Fabares, now 39, and his wife, Jay, 36, met in a drawing class at the Art Institutes. They graduated with combined debt of about $96,000. They have made consistent payments but have only been able to cut their debt down to about $73,000 over the past 13 years, taking intermittent art jobs in Los Angeles and the San Francisco Bay Area before moving back to San Diego.

Fabares has filed a request for debt relief under the Education Department’s “borrower defense” program, which cancels debt for defrauded students. Four years after applying, he has yet to receive an answer. “If life throws you any curveballs under this debt, it’s going to make you default,” he said. “It’s doing to blow you out of the water. All it takes is a life change.”

Fabares currently works for a consulting firm that moderates companies’ online presence. The couple also works as caretakers for his elderly grandparents. Having a large amount of debt, “affected just everything we did,” he said. “We weren’t able to save hardly anything. We just were living paycheck to paycheck hoping something would pan out.”

Now Fabares is involved in efforts to hold for-profit schools and the Education Department accountable for their actions. He encourages former students from The Art Institutes to join the Facebook group “I Am AI” to meet others seeking justice.

Having attended rule-making sessions held by the Education Department, he has seen in person how lobbyists and for-profit colleges have fought meaningful oversight. “It’s just one thing after another to hurt students,” he said.

CORPORATE INFLUENCE AT WORK

For-profit colleges that saddle students with mountains of debt and worthless degrees have successfully lobbied Congress and the Education Department to block or weaken rules that protect students. As a result, millions of students and graduates around the country are burdened with debt and disillusioned.

KEY FACTS:

The for-profit college industry has:

  • Spent nearly $71 million on lobbying in Washington since 2008.
  • Contributed more than $13.6 million in campaign money to Congress over the past 30 years, with money coming from PACs and individuals tied to the for-profit college sector.
  • Contributed 53 percent to Congressional Republicans and 46 percent to Congressional Democrats.

SOURCE: Center for Responsive Politics.

Toward the end of the Obama administration, the Education Department started taking steps to rein in predatory for-profit college operators. Officials successfully cut off the flow of federal student loan money to some of the worst abusers. But under Education Secretary Betsy DeVos, the department’s efforts to protect students from predatory schools are being gutted. Several investigations into the for-profit college industry have been scotched, and DeVos has brought on several former for-profit college executives who are now overseeing the same companies where they once worked or represented. DeVos has made it more difficult for defrauded students to get their loans discharged and scaled back rules designed to weed out poor career-training programs at for-profit schools. Meanwhile, student debt continues to rise: According to the Federal Reserve Bank of New York, there is $1.46 trillion in outstanding U.S. student loans, with about 9 percent of that in serious delinquency, having had no payments in 90 days.

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As Shutdown Drags on, Agencies Devoted to Consumer and Worker Health and Safety Unfunded and Deprioritized

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In Washington, D.C., and across the nation, furloughs forced by the partial government shutdown have hit agencies with a mission to protect consumers and workers particularly hard.

The shutdown, which is in its 19th day and currently the second-longest in US history, was triggered by President Donald Trump’s insistence that the budget include $5.7 billion for a wall across the U.S. southern border. The shutdown is already impeding vital consumer and worker protection priorities.

If the shutdown is allowed to persist, the cessation of these essential consumer and worker protections threatens significant public harms, as corporate violators go unpunished and food and product safety inspections are delayed and decreased.

The importance of these functions makes even slight capacity reductions a serious cause for concern, and it is noteworthy that the majority of federal workers at unfunded agencies whose responsibilities are considered essential are required to keep working without pay.

Table: Eleven federal consumer and worker protection agencies affected by the shutdown:

AgencyTotal StaffFurloughed Staff% Furloughed
Consumer Product Safety Commission55053096%
Equal Employment Opportunity Commission2,0781,97595%
Environmental Protection Agency13,97213,16094%
Securities and Exchange Commission4,4364,15194%
Commodity Futures Trading Commission67359188%
Federal Communications Commission1,4421,19783%
Federal Trade Commission1,12486277%
National Highway Traffic Safety Administration58433157%
Pipeline and Hazardous Materials Safety Administration56328551%
Food and Drug Administration17,9378,83049%
Federal Aviation Administration44,92917,79140%

Source: Agency shutdown memos submitted to the White House Office of Management and Budget.

For information about the specific impacts due to furloughs brought on by the shutdown at 11 federal consumer and worker protection agencies, read on. More

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Trump’s Plan Runs into a Wall

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Trump’s latest proposal to pay for a border wall very likely is illegal – a violation of the Anti-Deficiency Act.

Backing down from his pledge to shut down the government if Congress doesn’t allocate $5 billion to build the wall, Trump is now proposing that various agencies throughout the administration find surpluses in their budgets and allocate those surpluses toward building his wall.

The problem is – even if such surpluses exist in agency budgets – that money has been specifically authorized by Congress for other purposes, not for building a wall at the Mexican border. The Anti-Deficiency Act appears to prohibit using these funds for any purpose not authorized by Congress.

Normally the Anti-Deficiency Act is easily sidestepped because of Attorney General opinions that have narrowed its scope, such as not applying the Act to the White House since the White House is not an agency, and exempting volunteerism as long as the volunteer agrees not to seek compensation.

But in this instance, the second clause of the Anti-Deficiency Act seems to apply. 31 USC 1341(a)(1)(B) prohibits federal employees of agencies from involving the “government in a contract or obligation for the payment of money before an appropriation is made unless authorized by law.”

Trump may ask for the funds without violating the Anti-Deficiency Act since the law does not apply to the White House, but officials of the various agencies are not permitted to make any obligation for expenditures that have not yet been appropriated by Congress. Congress would have to appropriate these expenditures to make them permissible.

Again, this law is rarely invoked because of so many loopholes. The White House could try to argue that 31 USC 1341(a)(1)(B) merely prohibits an agency from making obligations for an expenditure before Congress has appropriated the money. Since the funds at the agencies have already been appropriated, Trump could argue that the law does not apply.

But I would read the Anti-Deficiency Act to be spot-on in this circumstance, since the appropriation language for these funds never authorized an expenditure for the wall. This constitutes spending money for a purpose never authorized by law or by the appropriations language.

Just to be clear, though, the Anti-Deficiency Act was designed to prevent agencies from spending money prior to authorization or in excess of authorization. In other words, it is intended to prevent agencies from spending money they do not have.

However, the Act’s emphasis that expenditures must be authorized by Congress strongly indicates that funds not authorized for the wall cannot be spent for that purpose. Allocating an agency’s surplus funds for the wall prior to any authorization by Congress would constitute a violation of 31 USC 1341(a)(1)(B) of the Anti-Deficiency Act.

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