On July 14, 2009, Minnesota Attorney General Lori Swanson filed suit against the National Arbitration Forum (NAF) of Minnesota, the nation’s largest arbitration company for consumer credit disputes, accusing NAF of consumer fraud, false advertising, and deceptive trade practices by “misrepresenting its independence” and hiding its “extensive ties” to the collection industry. When filing the suit, Swanson said in a press release: “This is a classic case of the little guy being stepped on by fine-print contracts.”
For several years now, credit card companies, banks, retail lenders, automobile sellers, and cell phone service providers have been inserting mandatory pre-dispute arbitration clauses in the fine print of consumer agreements. In many cases, the consumer does not know or understand that he is waiving an important right.
Swanson’s lawsuit charged that NAF works behind the scenes, “alongside creditors and against the interests of ordinary consumers”, to convince credit card companies and other creditors to insert arbitration provisions in their customer agreements and then appointing itself to resolve the disputes. The lawsuit alleged the NAF pays commissions to executives to convince creditors to insert mandatory arbitration clauses in customer agreements, thus generating arbitration filings and revenue for itself.
Fortunately, within days after being sued, NAF agreed to stop handling cases involving banks and credit card issuers over unpaid bills. Under the agreement with the Attorney General, NAF will no longer be allowed to settle disputes between consumers and credit card companies.
This is a significant victory for American consumers.
(source: Saint Paul Legal Ledger)