Minnesota Attorney General Punches National Arbitration Forum In The Face

Minnesota has filed a lawsuit against the National Arbitration Forum, alleging fraud, false advertising, and deceptive trade practices.

The lawsuit alleges that NAF is a biased forum for resolving disputes, and claims that NAF has business ties to collection agencies that prejudice its arbitrators. A Business Week article last year uncovered materials showing that NAF marketed its arbitration services to companies as more likely to collect on debts than litigation.

From the AG’s website:

The company tells consumers, the public, courts, and the government that it is independent and operates like an impartial court system. In fact, it has extensive ties to the collection industry-ties that it hides from the public,” said Attorney General Swanson.


The lawsuit alleges that the National Arbitration Forum, while holding itself out as impartial, 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 the Forum to decide the disputes. The lawsuit alleges that the Forum pays commissions to executives whose job it is to convince creditors to put mandatory arbitration clauses in their customer agreements. The suit alleges that the Forum does this to generate arbitration filings in the Forum-and hence, revenue-for itself.

San Francisco sued NAF last year, alleging similar biases and complaints.

Consumerist readers know how much we dislike forced arbitration, and we’re glad to see action being taken in courts, and in Congress, to curb its abuses.

Minnesota Sues a Credit Arbitration, Citing Bias [Business Week]
(Photo: nfarley)

Comments

Edit Your Comment

  1. Cafezinha says:

    I haven’t anything clever to add to the discussion, but I would like to thank you for the tip, and also the guffaw I got from the title.

  2. DefineStatutory says:

    Kudos for reporting on this. The more this type of story gets good press, the more likely other people/municipalites are likely to act on the consumer’s behalf.

  3. FooSchnickens - Full of SCAR says:

    You mean bad press, right?

  4. stanner says:

    Yeah, but what are the chances of that bill making it through congress?

    • I Love New Jersey says:

      @stanner: Depends on which side rents the most politicians.

      • Megalomania says:

        @I Love New Jersey: what do you mean “which side”? The two sides are consumers (e.g., citizens) and then large companies that use arbitration to screw over consumers. Given that politicians should already “belong” to the voters, they should already be on anti-arbitration

        (Yes, I recognize that some citizens, e.g., the ones directly profiting from it, are pro-arbitration, but no politician could possibly say with a straight face that their electorate would come out in favor of it)

        • MyPetFly says:

          @Megalomania:

          “…but no politician could possibly say with a straight face that their electorate would come out in favor of it…)

          Wanna’ bet? ; )

        • ceriphim says:

          @Megalomania: For real? You must not be from the U.S., hmm?

        • econobiker says:

          @Megalomania: “Given that politicians should already “belong” to the voters, they should already be on anti-arbitration.”

          Politicians belong to what or who ever can provide them with enough money to run again or a lobbying job after retiring. It has been a long cold time since a politician considered the pain of the voters when actually voting on legislation. Sure they will roll out the one example person who experienced a problem but that is as far as it will go… They say they will do much, but most often that “much” helps businesses and executives remove money from consumers…

          Adam Smith, indeed…

  5. schdav says:

    yay MN, we find the source of your food-borne illnesses and litigate your most hated companies.

  6. H3ion says:

    Does anyone know the status of the San Francisco suit? At least in the court system, an appearance of bias is grounds for recusal. Time for a class action?

  7. MyPetFly says:

    I wonder if the National Arbitration Forum will request binding arbitration in lieu of a court trial? ; )

  8. Munchie says:

    These posts against MBA’s are great but they usually have more power if you add a face to those getting screwed. I though consumerist was going to have an ongoing expose feating those who MBA’s have devastated.

    What happened to that idea?

    • Fry says:

      @Munchie: I believe it was just a one-week story-a-day feature. They still posts the stories (that are worth posting, I suppose) when they get them in their tip jar.
      If you’d like to see the stories that were posted, try the “Mandatory Binding Arbitration” tag. I haven’t looked, but my guess is they’d all be found there.

  9. Adhominem says:

    It’s not surprising that the arbitration companies are biased and unfair towards the consumer. However it is surprising that anybody with any power is doing something about it.

    That’s how little I expect of our public servants and representatives these days.

  10. Snarkysnake says:

    Heres a thought…

    Why not a class action to vacate all of NAF’s rulings ? Ask for a dollar so that everything is on the up and up (and lawyers don’t walk away with millions while the average litigant gets 23 cents) ?

    One result would be that in the future,phony baloney kangaroo courts like these would have to disclose these conflicts of interest or risk big damages and criminal sanctions in a real court of law.

    Nahhh. Fuck it.We need to abolish MBA.

  11. SacraBos says:

    Ideally, an arbitration should be a mini-court, where it’s cheaper to get justice. And if you get your butt kicked in arbitration, you ought to seriously consider not going to regular court (since you’ll get your butt kicked by a real judge/jury).

    Now it’s a sham. Rather than continually getting all their judgements overturned in real court, they created this “Mandatory Binding Arbitration” to keep them from getting reversed when a real judge finds out how one-sided it is. If the judgements were realistic, it wouldn’t need to be “Mandatory”. The lawyers would likely suggest you give up or not take the case.

  12. The Black Bird says:

    I am glad to see it happen. It just has to happen in many more places. There should be a total outlawing of these binding arbitration clauses.

    They should also outlaw the rip-off payday loans.

    I thank my lucky stars I’ve never had to deal with any of shady junk.

  13. EllaMcWho says:

    this is the face of MAB for me now:

    [www.npr.org]

    and her website for background (note – Jamie Leigh Jones was a victim of a horrific and violent sexual assault, so forewarned):

    [www.jamiesfoundation.com]

  14. czadd says:

    Today I’m glad to be from Minnesota. If we can do it, anyone can.

  15. WhoAsked You says:

    Obviously arbitration clauses just simply need to be made illegal if arbitration houses aren’t required to PROVE their objectivity and be audited by AG’s and boards of consumers every month.

  16. highpitch_83 says:

    Go get ‘em Lori! The AG’s office was the only group that could get the MN Family Council to stop robo-calling me 3 times a day – thank god at least one public office can get things done in this state!

  17. Anonymous says:

    Breaking News:
    The NAF just entered into a settlement with the Minn AG and agreed to stop all arbitrations except for internet domain names.

    http://www.businessweek.com/investing/wall_street_news_blog/archives/2009/07/big_arbitration.html

  18. Anonymous says:

    I was sued by a debt collectortrying to turn a NAF award into a judgement. They have since dropped the suit but I have somethng in store for them…

    The NAF is a farce and with no discovery allowed, consumers are/were powerless against them. Even if you object to the arbitration and request documentation, they will ignore you and go ahead with the proceeding. Their rules and stipulations you had to follow were mind bending.

    They actually kick out judges who don’t find in favor for the plaintiff which is usually the debt collector or credit card agency. Extremely biased against the consumer. I expect massive backlash against the ravenous debt collectors, crooked NAF goons and all lawyers involved. They knew it was a farce yet proceeded with this fraud. Meh…

  19. Anonymous says:

    It’s great that NAF is slowly folding in MN, but you guys have short memories! The AG’s office in Minnesota is terrible. Lori Swanson busted a union in her office, and fired a bunch of attorneys after they revealed unethical conduct in the office (like misuse of medicaid fraud funds, and how Lori would order attorneys to falsify affidavits and file frivolous claims just so that she could hold a press conference). All of the attorneys’ allegations were confirmed by the Minnesota Legislative Auditor. It’s great that NAF is out of the picture here, but I don’t think that the ends justify the means. Now that we know how Lori gets her results, I just can’t praise the office.

  20. Anonymous says:

    Unfortunately, this is an attorney general that has been slammed (and hard) for busting a union in her office. The Minnesota Legislative Auditor confirmed last year that she had ordered attorneys to falsify affidavits, file meritless lawsuits for good press, etc. She’s a bad apple, and while I’m no fan of NAF, I think it’s unfortunate that progressives are willing to turn a blind eye to the awful things that Lori Swanson has done in her office just because we dislike NAF. NAF is terrible, but Lori Swanson has shown that her tactics aren’t any better.

  21. Yoko Broke Up The Beatles says:

    The Minnesota AG only punches? Former MN Governor Jesse Ventura would’ve BODY-SLAMMED their asses!

  22. Anonymous says:

    6-9-2004 NAF Awarded Wolpoff & Abramson/MBNA an Award against me. It was not until this past Tues 6-21-09 that it went to trial. I had copy of Federal Arbitration Act with me. It states that there is a one year limit to collect. There had been a complaint filed on 6-23-05. I did not respond to it. Time of Mother’s death. Still it was over the one year limit from Arbitration.
    Judge Awarded the Arbitration Award. Overriding the Federal Arbitration Act with NC General Statue 1-569.22
    I thought Federal was above State.
    He would not let me approach bench to present evidence. Instead I had to give it to Opposing Attorney to read and present what he wanted to. I do not know what exactly to do now. I do feel I need to appeal and request a different judge. Any opinions? Help would be greatly appreciated.