ICYMI: Durbin Says Banning Mandatory Arbitration in College Contracts is "No Brainer"
Move would show the Department of Education is serious about fighting for students and protecting taxpayers
[WASHINGTON, D.C.] – U.S. Senator Dick Durbin (D-IL) today urged the Department of Education not to settle for half-measures when it comes to students saying, “If the Department of Education is serious about fighting for students and protecting taxpayers, a full ban of mandatory arbitration clauses is a no brainer.”
By Dick Durbin
May 11, 2016, 04:00 pm
Every day seems to bring news about another for-profit college scam. Hundreds of thousands of students have been deceived, misled, and harassed into enrolling at these schools where they end up with a mountain of debt and a worthless degree.
It’s long past time for this industry to face accountability. First and foremost, it’s time to make sure these for-profit colleges are accountable to their students.
The Department of Education is working on new federal regulations to provide students with relief when a school engages in unfair, deceptive, or abusive conduct.
Within these regulations is an opportunity to cement the Obama Administration’s legacy of putting students first – by banning the use of mandatory arbitration clauses in student enrollment contracts.
Under a mandatory arbitration clause, if a student is harmed by a school (for example, misled or deceived by a school’s advertising) and goes into debt as a result, the student can’t take the school to court. Instead, the student is forced into a secret arbitration proceeding where, more often than not, the deck is stacked against the student’s interests.
The Department of Education has publicly admitted that mandatory arbitration clauses harm students. While public and private nonprofit colleges do not force these clauses on their students, the use of mandatory arbitration clauses is a hallmark of the for-profit college industry.
Mandatory arbitration clauses are often buried in fine print, and most students are unaware that these clauses require them to give up their right to a day in court if the school’s misbehavior causes harm. Instead, students are given a pile of legal papers and told they must sign on the dotted line or they can’t take classes.
Arbitration proceedings allow schools to avoid being held accountable by students for their misconduct. The secrecy of the process prevents that misconduct from coming to the attention of federal regulators.
It also prevents prospective students from knowing that students before them were misled or deceived by the school they are thinking about attending.
Mandatory arbitration clauses were used by Corinthian Colleges, Inc. – the now bankrupt for-profit giant which for years lied to students and the federal government about job placement rates and other data.
Corinthian students are entitled under the law to federal student loan discharges. They deserve it, but the reality is that because Corinthian is now defunct, that relief will come on the taxpayers’ dime.
Imagine how different the scenario would be if Corinthian students had been able to sue their school directly – if they weren’t prevented from doing so in their enrollment agreements. Instead of coming to taxpayers for relief, these students would have been able to hold the school accountable for its own wrongdoing.
While working on its new regulations, the Department of Education took a courageous step and put forward a common-sense proposal to ban mandatory arbitration clauses for colleges that accept federal funds and to allow students to hold those schools accountable in court. The Department has the existing legal authority to take this step, and they should use it.
Countless veterans groups, consumer advocates, state Attorneys General, civil rights groups, and student organizations have recognized the harm of these mandatory arbitration clauses and support a ban. A ban will allow victimized students to obtain relief from culpable schools instead of from the taxpayers, will bring transparency to abuses that are now hidden, and will deter future abuses by unscrupulous for-profit colleges.
If the Department of Education is serious about fighting for students and protecting taxpayers, a full ban of mandatory arbitration clauses is a no brainer. I urge the Department of Education not to settle for half-measures when it comes to students.
U.S. Senator Dick Durbin (D-IL), Assistant Democratic Leader
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