The Attorney General of Minnesota and consumer advocates across the country filed suit against the National Arbitration Forum and some of its credit card company business partners who have been accused of using an illegal scheme to resolving credit card disputes in a fraudulent way.
Rather than bringing a suit in court, businesses and individuals sometimes choose to have their dispute resolved by an independent third party called an arbitrator. The arbitrator listens to each side present their facts, and renders a decision. The arbitrator purports to be independent and neither for nor against either party at the onset of the proceeding. This procedure is often more efficient, less costly and quicker than a traditional legal court system. Each party agrees to split the cost of the arbitrator-typically at several hundred dollars per hour, agrees to waive their constitutional right to a jury trial, and expects to obtain justice through an unbiased proceeding. Sometimes it works that way. However a massive investigation reveals a pro-business scheme to deprive individuals of constitutional rights and huge sums of money.
In July 2009, Minnesota’s attorney General, Lori Swanson filed suit after its investigation revealed the National Arbitration Forum-an entity holding itself out to the public as employing independent arbitrators and charged with resolving thousands of consumer credit card disputes, was owned by and corporately affiliated with a major consumer debt collection agency.
The fine print in almost every credit card agreement requires that the consumer waive its constitutional right to a trial by jury and that a dispute be resolved exclusively through a private system of binding arbitration-meaning no right to appeal. Credit card consumers did not know that the Forum works alongside creditors-behind the scenes and against the interests of consumers to convince creditors to place mandatory –pre-dispute arbitration clauses in the customer agreements and to appoint the Forum as the arbitrator of any disputes.
The Attorney General’s lawsuit tells of the Forum hiding from the public that the forum is financially affiliated with a New York Hedge fund group that owns one of the country’s major debt collection enterprises. Through several transactions, the hedge fund took control of the country’s largest debt collectors and became affiliated with the Forum-the country’s largest debt collection arbitration company. When a consumer uses the National Arbitration Forum, they are told that the Forum has “no relationship with any party”, and “does not counsel our users”. Such comments are not true. The lawsuit tells that the National Arbitration Forum works closely with creditors behind the scenes to:
1) Encourage credit card companies to file arbitration claims to collect debt from consumers
2) Write arbitrations clauses to use in credit card agreements
3) Advise credit card companies on arbitration legal trends
4) Sometime write complaints to be used and filed against consumers
5) Sends the credit card companies to debt collecting firms-that in turn sends the case to the National Arbitration Forum for arbitration to resolve the dispute
It gets worse, the lawsuit also tells of the Forum telling collection agencies that the Forum “aligns itself AGAINST CONSUMERS” specifically telling the debt collectors and credit card companies that “the customer does not know what to expect from Arbitration and is more willing to pay.” That consumers “ask you to explain what arbitration is then basically hand you the money,”
The attorney General also wrote that the National Arbitration Forum even tells the credit card companies and debt collector that; “[y]ou have all the leverage [in arbitration] and the customer really has no choice but take care of the account”—It seems the NAF is telling creditors that using the Forum as arbitrators is a guarantee recovery and win.
In fact in one complaint filed by a consumer advocate reported that when the Forum served as “independent” arbitrators in California- in 99.8% of the time, the Forum sided with the credit card companies and against consumers. A biased decision that benefits credit card companies costs consumers thousands of dollars and destroys trust in the arbitration system as a whole.
“I think the activity of the Forum taints the entire arbitration process. Consumers are unwilling to place their trust in a system that allows powerful players to manipulate the individual consumer. Individuals have developed a mistrust of the system-believing the justice system is rigged in favor of big business. This Lawsuit filed against the National Arbitration Forum identifies facts that fuel this belief. Attorney General Swanson’s suit on behalf of consumers helps bring back the faith that the “justice for the little guy” is still important in this country. I applaud the work she did in this case.”
-Attorney Gale D. Pearson, Pearson Randall, Schumacher & Labor, PA. , a law firm that practices in the area of consumer protection law, and is working on issues relevant to this case.
The suit filed by the Attorney General is asking for injunctive relief and civil penalties. Several lawsuits have been filed on behalf of individuals to seek recovery of monies paid pursuant to a decision awarded in arbitration using the National Arbitration Forum in favor of the following companies: American Express, Bank of America, MBNA Corporation, Wells Fargo, Wachovia, Capital One Financial Corporation, Capital One Bank (USA), NA Capital One, NA, J.P. Morgan Chase, Citigroup, Inc, Discover Card and others.
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If you are interested in learning more about consumer protection law in Minnesota or the National Arbritration Forum lawsuit (NAF), please contact our firm for a free consultation and information regarding the obligations of the facility and your rights as a resident or concerned family member. To contact attorney Gale Pearson, directly please send an email to firstname.lastname@example.org, or call Gale at 612-767-7500.