Minn. AG Suit Forces National Arbitration Forum Out of Credit Card Disputes

Following a suit filed last week by Minnesota Attorney General Lori Swanson alleging serious consumer law violations by the National Arbitration Forum (NAF), the Minnesota-based company has agreed to stop settling disputes between consumers and credit card companies. The suit, which claimed that the company had extensive financial ties to the companies for whom it settled disputes, raised serious concerns about the impartiality of its arbitration proceedings.

While the agreement reached Sunday between NAF and Ms. Swanson was a welcome development, it is merely the first step in putting an end to the pervasiveness of forced arbitration clauses in consumer contracts. Often found in the fine print of everything from credit card and cell phone contracts to nursing home agreements and employment contracts, these clauses force consumers to sign away their rights to have a jury hear their case before a dispute even arises.

In a statement released today, AAJ President Les Weisbrod said “The appalling business practices of the National Arbitration Forum (NAF) illustrate how forced arbitration fails to protect consumers from predatory financial lenders and other negligent corporations…[and] while the settlement with the attorney general is a major win for consumers, the NAF is not the only company that uses forced arbitration.” He went on to state that the settlement underscores the need for Congress to take action to ban these clauses from consumer contracts.

For her part, Ms. Swanson agrees. According to the Associated Press, she has been invited by Congress to testify Wednesday before a Congressional subcommittee on oversight and government reform about the need to abolish these arbitration provisions. Let us hope that Congress follows Ms. Swanson’s lead and proceeds to pass the Arbitration Fairness Act (S. 931 / H.R. 1020) and the Fairness in Nursing Home Arbitration Act (S. 512 / H.R. 1237).