[Congressional Record Volume 146, Number 108 (Thursday, September 14, 2000)]
[Extensions of Remarks]
[Page E1482]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




           THE AMERICAN HOME BUYERS PROTECTION ACT, H.R. 5033

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                        HON. CHARLES A. GONZALEZ

                                of texas

                    in the house of representatives

                      Thursday, September 14, 2000

  Mr. GONZALEZ. Mr. Speaker, on July 27, I introduced the American Home 
Buyers Protection Act, H.R. 5033. This bill will make much needed 
reforms in the practice of including mandatory arbitration clauses in 
homebuilding purchase contracts.
  Mr. Speaker as you may know, mandatory arbitration clauses are now 
ubiquitous in consumer contracts. These clauses deny consumers the 
opportunity to go to court to seek redress for damage or harm from a 
product or service. Many of these clauses typically name a private 
arbitration service. This creates a potential conflict of interest for 
a private arbitrator that both must neutrally assess the merits of a 
case while simultaneously profiting from the continual referral of 
cases from a particular industry. This is a situation that I believe 
demands immediate redress by Congress.
  Mr. Speaker, I do not believe arbitration clauses are per se bad. As 
a former state district judge, I took the lead in bringing alternative 
dispute resolution mechanisms to the civil courtrooms of my hometown of 
San Antonio. But, I do believe that it is wrong to insert these clauses 
without the knowledge and prior approval of consumers. I strongly 
believe that alternative dispute resolution clauses must be mutually 
agreed to and contain plain language descriptions of their effects. In 
addition, I do not believe that these clauses should be imposed on 
consumers as a condition precedent for entering into a commercial 
contract, and that the naming of arbitrator must be mutually agreed to 
by both parties.
  The homebuilding industry in particular, I believe, has used 
mandatory arbitration clauses in an excessive and harmful manner. For 
most families, a purchase of a home is the largest single investment 
they will make. It is frequently the largest asset they will ever own. 
Mandatory arbitration agreements which allow homebuilders to avoid 
court analysis of their building practices has allowed numerous 
homebuilders to escape the consequences of shoddy workmanship and 
construction. I have personally seen several homes in San Antonio that 
were negligently and poorly constructed, inflicting serious financial 
harm on the families that purchased these homes.
  My bill the American Home Buyers Protection Act, will make the 
following reforms to the mandatory arbitration process as it regards 
homebuilding purchase contracts:
  1. It will make it illegal for homebuilders to require agreement to a 
mandatory arbitration agreement as a condition precedent to entering 
into a contract for the purchase of a new house.
  2. It will require mandatory arbitration agreements to be contained 
on a separate document from the underlying contract and to possess the 
following plain language statement: ``By Agreeing to Binding 
Arbitration You Are Giving Up Your Right To Go To Court.''
  3. It will require mandatory arbitration agreements to contain a 
procedure that adequately guarantees the purchaser an opportunity to 
participate in the selection of an arbitrator, and shall require that 
the selection of the arbitrator may only occur after a dispute 
regarding the homebuilding contract has arisen.
  Mr. Speaker I believe the reforms in The American Home Buyers 
Protection Act are a good first step towards alleviating the abuse of 
alternative dispute resolution procedures by homebuilders. I believe 
that it is time that Congress take action now to protect American 
families from arbitration procedures that will deny them adequate 
protection of their most important purchase, their home.

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