Consumer Arbitration Fairness and Transparency Act

(a) Short Title

This Act may be cited as the "Consumer Arbitration Fairness and Transparency Act" or the "CAFTA".

(b) Findings

Congress finds the following:

1. The Federal Arbitration Act of 1925 was enacted to enforce agreements between commercial entities of roughly equal bargaining power and was not designed to govern disputes between corporations and individual consumers.
2. The Supreme Court's expansion of the FAA through decisions including AT&T Mobility LLC v. Concepcion (2011) and Epic Systems Corp. v. Lewis (2018) has resulted in the widespread imposition of mandatory pre-dispute arbitration clauses on consumers who have no meaningful ability to negotiate contract terms.
3. Mandatory consumer arbitration eliminates access to jury trials, prohibits class actions, restricts appellate review, and forces dispute resolution into private proceedings with no public record.
4. Non-disclosure agreements imposed as conditions of arbitration settlements prevent consumers from warning others, filing detailed regulatory complaints, or cooperating with journalists investigating patterns of corporate wrongdoing.
5. The lack of transparency in consumer arbitration creates a structural information asymmetry that benefits repeat-player corporations at the expense of individual consumers and the public interest.
6. Federal regulatory agencies including the Consumer Financial Protection Bureau and the Federal Trade Commission lack comprehensive data on consumer arbitration outcomes necessary to fulfill their consumer protection mandates.
7. These conditions require federal legislation to restore basic fairness, transparency, and accountability to the consumer arbitration system.

(c) Purposes

The purposes of this Act are:

1. To require disclosure of consumer arbitration activity and outcomes to federal regulators.
2. To prohibit non-disclosure agreements that suppress information about consumer disputes, regulatory complaints, and public safety.
3. To ensure the neutrality and independence of arbitrators who decide consumer disputes.
4. To restore access to class action proceedings for small-value consumer claims.
5. To provide meaningful appellate review of arbitration awards in consumer disputes.

As used in this Act:

(a) "Arbitration" means any process or proceeding in which a dispute is submitted to one or more neutral third parties who render a binding decision, regardless of whether such process is called arbitration, dispute resolution, or any other term.

(b) "Consumer" means any natural person who seeks or acquires goods, services, money, or credit for personal, family, or household purposes.

(c) "Consumer arbitration" means arbitration of a dispute between a consumer and a company arising from the consumer's acquisition or use of goods, services, money, or credit for personal, family, or household purposes.

(d) "Company" means any person, corporation, partnership, limited liability company, association, or other entity that provides goods, services, money, or credit to consumers in the ordinary course of business.

(e) "Covered company" means a company that is a party to ten (10) or more consumer arbitration proceedings initiated in any calendar year.

(f) "Pre-dispute arbitration agreement" means any agreement to arbitrate a dispute that has not yet arisen at the time the agreement is made.

(g) "Non-disclosure agreement" or "NDA" means any agreement, clause, or provision that restricts or prohibits a party from disclosing information about a consumer arbitration proceeding, including but not limited to the existence of the dispute, the nature of the claim, the terms of any settlement, or the outcome of the proceeding.

(h) "Arbitration provider" means any entity that administers consumer arbitration proceedings, including but not limited to the American Arbitration Association (AAA), JAMS, and the National Arbitration and Mediation (NAM).

(i) "Bureau" means the Consumer Financial Protection Bureau.

(j) "Commission" means the Federal Trade Commission.

(k) "Non-profit advocacy organization" means any organization exempt from taxation under section 501(c)(3) or 501(c)(4) of the Internal Revenue Code of 1986 that engages in consumer protection, public interest advocacy, or legal assistance activities.

(l) "Class action, collective action, or other representative proceeding" means a judicial proceeding filed in a court of competent jurisdiction in which one or more named plaintiffs seek to represent a class of similarly situated persons. This term does not mean class arbitration or any representative proceeding conducted by an arbitrator or arbitration provider.

(a) Disclosure Requirement

Each covered company shall file a quarterly report with the Bureau and the Commission within thirty (30) days after the close of each calendar quarter. The report shall include:

1. The total number of consumer arbitration proceedings initiated against the company during the quarter.
2. The total number of consumer arbitration proceedings concluded during the quarter, including the disposition of each (award for consumer, award for company, settlement, withdrawal, or other).
3. For each concluded proceeding:
   1. The general category of the consumer's claim (product defect, billing dispute, contract dispute, warranty, service failure, or other).
   2. The name of the arbitration provider that administered the proceeding.
   3. The total amount claimed by the consumer.
   4. The total amount awarded to the consumer, if any.
   5. Whether the consumer was represented by an attorney.
   6. The duration of the proceeding from filing to conclusion.
   7. Whether a non-disclosure agreement was executed as part of any settlement.
   8. The total fees and costs paid by the consumer.
   9. The total fees and costs paid by the company.
4. A copy of each form of pre-dispute arbitration agreement used by the company during the quarter, including any amendments or modifications.

(b) Arbitration Provider Reporting

Each arbitration provider that administers consumer arbitration proceedings shall file a quarterly report with the Bureau and the Commission within thirty (30) days after the close of each calendar quarter. The report shall include:

1. The total number of consumer arbitrations administered during the quarter, disaggregated by company.
2. The total number of fee waiver applications received and the number granted.
3. The identity of each arbitrator who presided over a consumer arbitration during the quarter, the number of consumer arbitrations assigned to that arbitrator, and the outcomes of each.
4. The total amount of fees received from consumers and from companies, disaggregated by proceeding.

(c) Public Database

The Bureau shall maintain a public database, searchable by company name, of all information reported under subsections (a) and (b), with personally identifiable consumer information redacted. The Bureau shall make this database available through its public website and through a publicly accessible application programming interface (API) within one hundred eighty (180) days of the effective date of this Act.

(d) Penalties for Non-Compliance

1. Any covered company that fails to file a report required by subsection (a) shall be subject to a civil penalty of not more than five thousand dollars ($5,000) per day for each day the report is late.
2. Any arbitration provider that fails to file a report required by subsection (b) shall be subject to a civil penalty of not more than five thousand dollars ($5,000) per day for each day the report is late.
3. Any covered company that knowingly files a materially false or misleading report shall be subject to a civil penalty of not more than one hundred thousand dollars ($100,000) per violation.

(e) Coordination with State Regulators

The Bureau shall share all information received under this section with the attorney general of any state upon request.

(a) Void and Unenforceable Provisions

Any provision of a non-disclosure agreement arising from or related to a consumer arbitration proceeding shall be void and unenforceable to the extent it restricts or prohibits the consumer from disclosing:

1. The fact of the dispute — that a dispute existed between the consumer and the company, including that the consumer initiated or participated in an arbitration proceeding.
2. The nature of the claim — the general category of the consumer's claim, including the type of product or service involved, the nature of the alleged harm, and the general factual basis of the dispute.
3. Regulatory complaints — any information provided to a federal, state, or local regulatory agency, law enforcement agency, or elected official, including but not limited to the Bureau, the Commission, state attorneys general, and state consumer protection agencies.
4. Safety information — any information related to a risk to public health or safety, including product defects, service failures, or practices that pose a risk of bodily harm, financial harm, or property damage to consumers.
5. Attorney consultations — any information disclosed to an attorney for the purpose of obtaining legal advice, whether or not the attorney is retained.
6. Non-profit advocacy organizations — any information disclosed to a non-profit advocacy organization for the purpose of obtaining assistance with modification, challenge, or review of the non-disclosure agreement, or for the purpose of contributing to public databases, research, or advocacy related to consumer arbitration.

(b) Scope

Subsection (a) applies to:

1. Any NDA executed as part of a settlement or resolution of a consumer arbitration proceeding.
2. Any NDA executed as a condition of receiving payment under a consumer arbitration settlement.
3. Any confidentiality clause contained within a consumer arbitration settlement agreement.
4. Any standalone confidentiality agreement executed in connection with a consumer arbitration proceeding.

(c) No Retaliation

No company shall retaliate against a consumer for exercising any right preserved under subsection (a), including but not limited to:

1. Seeking to void or modify a settlement agreement.
2. Demanding return of settlement proceeds.
3. Initiating or threatening litigation based on disclosures protected under subsection (a).
4. Reporting the consumer to a credit reporting agency.

(d) Enforcement

A consumer whose rights under this section are violated may bring a civil action in any court of competent jurisdiction and shall be entitled to:

1. Declaratory relief establishing the invalidity of the offending provision.
2. Injunctive relief preventing enforcement of the offending provision.
3. Actual damages.
4. Statutory damages of not less than ten thousand dollars ($10,000) per violation.
5. Reasonable attorney's fees and costs.

(e) Non-Waiver

The protections of this section may not be waived prospectively. Any agreement purporting to waive the consumer's rights under this section is void and unenforceable.

(a) Financial Disqualification

No person shall serve as an arbitrator in a consumer arbitration proceeding if that person:

1. Has received, directly or indirectly, twenty thousand dollars ($20,000) or more in compensation, fees, gifts, or other benefits from any party to the proceeding, or from any affiliate, parent company, or subsidiary of any party, within the thirty-six (36) months preceding the date of appointment; or
2. Has served as arbitrator in five (5) or more consumer arbitration proceedings involving any party to the proceeding, or any affiliate, parent company, or subsidiary of any party, within the thirty-six (36) months preceding the date of appointment.

Disqualification is triggered if either threshold is exceeded.

(b) Disclosure Requirements

Before accepting appointment in a consumer arbitration proceeding, a prospective arbitrator shall disclose in writing to all parties:

1. All financial relationships with any party to the proceeding, or with any affiliate, parent company, or subsidiary of any party, within the preceding sixty (60) months, including the total amount of compensation received.
2. All consumer arbitration proceedings in which the prospective arbitrator has served as arbitrator involving any party to the proceeding, or any affiliate, parent company, or subsidiary of any party, within the preceding sixty (60) months, including the outcome of each such proceeding.
3. Any ownership interest in the arbitration provider administering the proceeding.
4. Any professional, social, or familial relationship with any party, any representative of any party, or any witness expected to participate in the proceeding.

(c) Challenge and Disqualification

1. Any party may challenge the appointment of an arbitrator based on information disclosed under subsection (b) or based on information that the arbitrator failed to disclose.
2. A challenge shall be decided by the arbitration provider within ten (10) business days of filing.
3. If the arbitration provider fails to act on a challenge within ten (10) business days, the challenge shall be deemed granted and the arbitrator disqualified.
4. A court of competent jurisdiction may vacate any arbitration award rendered by an arbitrator who was subject to disqualification under subsection (a), regardless of whether a challenge was filed during the proceeding.

(d) Arbitration Provider Independence

No arbitration provider shall:

1. Derive more than twenty-five percent (25%) of its annual consumer arbitration administration revenue from any single company or group of affiliated companies.
2. Permit any company or group of affiliated companies to select or pre-approve a roster of arbitrators for consumer disputes.
3. Offer volume discounts, loyalty programs, or any other financial incentive to companies based on the number of arbitrations administered.

(e) Annual Arbitrator Report

Each arbitration provider shall publish an annual report listing each arbitrator who presided over consumer arbitration proceedings during the prior calendar year, the number of proceedings, the identity of the parties, the outcomes, and the fees paid by each party. This report shall be posted on the arbitration provider's website and submitted to the Bureau.

(a) Pre-Dispute Waivers Void — Pattern Threshold

Any provision in a pre-dispute arbitration agreement that waives the right of a consumer to participate in a class action, collective action, or other representative proceeding shall be void and unenforceable if ten (10) or more consumers have filed substantially similar claims against the same company arising from the same or substantially similar conduct, practice, product, or service. When a class action waiver is void under this subsection, affected consumers may bring or join a class action, collective action, or other representative proceeding in a court of competent jurisdiction, and may not be compelled to arbitrate claims that are the subject of such proceeding. Any such proceeding shall be governed by the Federal Rules of Civil Procedure, including Rule 23, or the applicable state rules of civil procedure for class actions.

(b) Determination of Pattern

1. For purposes of subsection (a), claims are "substantially similar" if they arise from the same course of conduct, the same product or service, the same contractual provision, or the same business practice, regardless of the amount of damages alleged by any individual consumer.
2. For purposes of subsection (a), a claim is "filed" if it is evidenced by any of the following:
   1. An arbitration demand filed with an arbitration provider.
   2. A formal complaint filed with a federal, state, or local regulatory agency, including the Bureau, the Commission, and state attorneys general.
   3. A civil complaint filed in a court of competent jurisdiction.
   4. An arbitration filing reported under Section 3 of this Act or an entry in the Bureau's public database established under Section 3(c).
3. The pattern threshold may be established at any time, including after one or more individual arbitration proceedings have already been initiated or concluded.

(c) Judicial Determination

The question of whether the pattern threshold has been met and whether a class action waiver is void under this section shall be determined by a court of competent jurisdiction, not by an arbitrator.

(d) Preservation of Individual Arbitration Rights

Nothing in this section shall be construed to prevent a consumer from voluntarily choosing to arbitrate an individual claim, provided the consumer makes that choice after the dispute has arisen and after being informed in writing that a pattern threshold has been met and that class action rights are available.

(e) Opt-In Mechanism for Post-Dispute Agreement

A consumer may agree to waive class action rights after a dispute has arisen, provided that:

1. The waiver is set forth in a standalone document separate from any settlement or arbitration agreement.
2. The consumer is provided with a written explanation of the rights being waived, in plain language at or below an eighth-grade reading level.
3. The consumer is informed that ten (10) or more consumers have filed substantially similar claims, if that fact is known.
4. The consumer is given no less than fourteen (14) days to consider the waiver before it becomes effective.
5. The waiver may be revoked by the consumer within thirty (30) days of execution without penalty.

(f) No Dollar Threshold

The void and unenforceable determination under subsection (a) does not depend on the amount in controversy for any individual claim or for the aggregate class. The pattern threshold is based solely on the number of consumers with substantially similar claims.

(a) Grounds for Appeal

A party to a consumer arbitration proceeding may appeal an arbitration award to a court of competent jurisdiction on any of the following grounds:

1. Error of law — the arbitrator committed a material error in interpreting or applying the law governing the dispute, and the error materially affected the outcome.
2. Arbitrator bias — the arbitrator exhibited bias, partiality, or prejudice against a party, whether or not such bias was known to the party during the proceeding.
3. Denial of due process — a party was denied a fundamentally fair hearing, including but not limited to:
   1. Denial of a reasonable opportunity to present evidence or cross-examine witnesses.
   2. Refusal to consider material evidence properly submitted.
   3. Failure to disclose information required under Section 5(b) of this Act.
   4. Ex parte communication between the arbitrator and any party.
4. Manifest disregard of the evidence — the arbitrator's findings of fact are so clearly erroneous as to imply that the arbitrator disregarded material evidence in the record.

(b) Standard of Review

1. Questions of law shall be reviewed de novo.
2. Findings of fact shall be reviewed for clear error.
3. The burden of proof on appeal shall be on the party seeking to vacate or modify the award.

(c) Timing

1. An appeal under this section must be filed within ninety (90) days of the date the arbitration award is issued.
2. The filing of an appeal shall not automatically stay enforcement of the award. A party may request a stay pending appeal, which the court may grant upon a showing of likely success on the merits and irreparable harm.

(d) Attorney's Fees on Appeal

1. If a consumer prevails on appeal, the court shall award reasonable attorney's fees and costs to the consumer.
2. If a company appeals and does not prevail, the court shall award reasonable attorney's fees and costs to the consumer.
3. A consumer who appeals in good faith and does not prevail shall not be liable for the company's attorney's fees or costs on appeal.

(e) Preservation of Existing Grounds

Nothing in this section shall be construed to limit or eliminate any ground for vacating, modifying, or correcting an arbitration award that exists under the Federal Arbitration Act (9 U.S.C. §§ 10–11) or any other applicable law.

(a) Protected Disclosures

Notwithstanding any non-disclosure agreement, confidentiality clause, or other contractual provision, a consumer may disclose any information related to a consumer arbitration proceeding to a non-profit advocacy organization for the purpose of:

1. Obtaining assistance with the modification, challenge, or review of a non-disclosure agreement.
2. Contributing information to a public database of arbitration clauses or outcomes.
3. Supporting research related to consumer arbitration practices and outcomes.
4. Participating in advocacy efforts related to arbitration reform.

(b) Organization Obligations

A non-profit advocacy organization that receives information under subsection (a) shall:

1. Not disclose any personally identifiable information about the consumer without the consumer's express written consent.
2. Not disclose any information that the consumer identifies as protected under a non-disclosure agreement, except as authorized by the consumer in writing.
3. Maintain reasonable data security measures to protect information received from consumers.
4. Provide the consumer with a written description of how the information will be used before the consumer makes the disclosure.

(c) Safe Harbor

A consumer who discloses information to a non-profit advocacy organization in compliance with this section shall not be deemed to have breached any non-disclosure agreement, confidentiality clause, or other contractual provision. No company shall seek damages, injunctive relief, or other remedy against a consumer for disclosures made in compliance with this section.

(d) Attorney-Client Privilege

Disclosures made by a consumer to an attorney employed by or acting on behalf of a non-profit advocacy organization for the purpose of obtaining legal advice shall be protected by attorney-client privilege to the same extent as disclosures made to privately retained counsel.

(a) Bureau Rulemaking

The Bureau shall, within one hundred eighty (180) days of the effective date of this Act, promulgate rules to implement the provisions of Sections 3 and 4, including:

1. The format and content of quarterly reports.
2. The design and operation of the public database.
3. Procedures for enforcement of penalties under Section 3(d).

(b) Commission Rulemaking

The Commission shall, within one hundred eighty (180) days of the effective date of this Act, promulgate rules to implement the provisions of this Act as they relate to unfair or deceptive acts or practices under Section 5 of the Federal Trade Commission Act.

(c) Coordination

The Bureau and the Commission shall coordinate their rulemaking and enforcement activities under this Act to avoid duplication and ensure consistent interpretation.

(a) Floor, Not Ceiling

This Act establishes minimum standards for consumer arbitration transparency, fairness, and accountability. Nothing in this Act shall be construed to preempt, limit, or otherwise affect any state law, regulation, or rule that provides greater protections to consumers than those provided by this Act.

(b) Savings Clause

Nothing in this Act shall be construed to limit or eliminate any right or remedy available to a consumer under state law, including state consumer protection statutes, unfair and deceptive practices acts, or common law remedies.

If any provision of this Act, or the application of any provision to any person or circumstance, is held to be unconstitutional or otherwise invalid, the remainder of the Act and the application of that provision to other persons or circumstances shall not be affected.

This Act shall take effect one hundred eighty (180) days after the date of enactment, except that:

1. Section 3 (quarterly disclosure) shall apply to the first full calendar quarter beginning after the effective date.
2. Section 4 (NDA prohibition) shall apply to any NDA executed on or after the effective date and to any NDA executed before the effective date that is the subject of a dispute or enforcement action initiated on or after the effective date.
3. Section 6 (class action restoration) shall apply to any pre-dispute arbitration agreement in effect on or after the effective date.