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The alternative dispute resolution (ADR) craze was touted by supporters as a way to avoid the nightmare of court and jury trials. Well the nightmare was mainly one for big credit companies and other big corporations who didn’t like their win percentage when a neutral judge or a jury looked at the facts and the law. So they ran massive ad campaigns and brainwashed the public into thinking that ADR was great. What they didn’t tell the public as they slipped forced arbitration clauses into almost every contract that anyone signs these days, was that they were getting cozy with the credit industry and making huge profits from those relationships. Simply said, they created a biased system where the consumer had no recourse and the fox was guarding the chicken coop. The problem is particularly serious in the credit card industry

Now the National Arbitration Forum (NAF) has been sued by the attorney general of Minnesota and consumers in California for corruption in being too closely connected to the dredit card companies. They used to do 200,000 arbitrations a year involving consumer credit card disputes. Turns out they are connected to a debt collection company. Listen to what a consumer advocate in the debt area has to report

For those who think that this is the American free enterprise system at work I suggest some remedial study of economics. When they take away consumer rights and then fix the system that is wrong at least and probably criminal.

In a blog at Lawyers USA (7/23), Sylvia Hsieh wrote, "In a stunning turn of events, the kingpin of consumer debt arbitration, the National Arbitration Forum, has been knocked out of the consumer debt business amidst allegations of consumer fraud, throwing into jeopardy hundreds of thousands of arbitration awards." The ink "was barely dry on the settlement when the American Arbitration Association announced on July 22 that it too would be getting out of debt collection arbitration until it can develop standards of practice. Consumer lawyers reacted swiftly." Dan Edelman, "a consumer rights attorney with Edelman, Combs, Lat turner & Goodwin in Chicago, has already filed the first class action against credit giant MB NA/FA and the debt collection law firm Mann Bracken, alleged to have financial ties to NAF, seeking to set aside thousands of arbitration awards and judgments entered against Illinois consumers since 2007." Lawyers "handling individual consumer debt cases are also planning to use the recent revelations to get judgments overturned and sue for damages."

MS Tribune: Congress should protect consumers from mandatory arbitration. The Minneapolis Star Tribune (7/23) editorialized, "Consumers using credit cards, cell phones and other forms of credit — meaning most Minnesotans — got a major victory this week when state Attorney General Lori Swanson announced that the St. Louis Park-based National Arbitration Forum, the country’s largest arbitrator of credit collections, would stop most of its work in the state." While some "now claim that a day in court may get very crowded if consumers go through the legal process for dispute resolution, it’s preferable to a system that allegedly was gamed in favor of big business against the little guy." The Tribune argues, "But with credit cards and cell phones knowing no state borders, it’s well past time for Congress to pass a law to better protect consumers."

I am interested in hearing from any Hawaii consumers who have been forced into arbitration with either AAA or the NAF. If you find yourself in a situation like this hire an attorney to challenge the requirement of going into arbitration, keep all of your records and take notes about what the company says to you.


  1. Gravatar for Susan Kilpatrick
    Susan Kilpatrick

    Interesting article. However, I must question why the article is purported to speak to the AMERICAN Arbitration Association, but in actuality it bemoans the difficulties of dealing with the NATIONAL Arbitration Association - hardly the same.

    This is just another example of sensational journalism stretching the facts to fit their point of view. Shame on you.

  2. Thanks for the comment. I am not sure what the situation is at AAA but they also have taken the same action that NAF took:

    "The Wall Street Journal is reporting that the American Arbitration Association "will stop participating in consumer-debt-collection disputes," at least--according to an unnamed AAA official quoted in the story--"until some standards or safeguards are established." I'm not sure what that caveat means, but it suggests a lobbying strategy, consistent with AAA's prior positions, to get Congress to adopt minimum standards instead of making arbitration truly voluntary. It's also unclear whether the AAA's withdrawal will extend beyond consumer debt, as NAF's does, to include other forms of consumer or employment disputes. AAA doesn't currently handle a lot of collection cases--certainly nowhere near as many as NAF." AAA certainly isn't involved in the type of conflict that NAF has been involved in but it is strongly perceived by plaintiffs attorneys that AAA is pro defense.

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