Wednesday

Is Arbitration Fair? Proof that Arbitration is Unfair

The Minnesota Attorney General has filed a lawsuit against one of the big private arbitration companies, the National Arbitration Forum (NAF), alleging their arbitration process is rigged in favor of big businesses who pay it big bucks.

Minnesota-based NAF is the largest consumer credit private arbitration company which recently came under fire for its extensive "back room" relationships with the very companies that hire it to get favorable judgments against consumers. The AG alleges that NAF "secretly worked alongside creditors, and against consumer interests, in seeking to have mandatory, predispute arbitration clauses inserted in credit agreements signed by consumers" and appears to have good proof of it.

NAF has long claimed it was "independent and neutral" but it turns out that a group of New York hedge funds invested in the arbitration company and also acquired a majority stake in a debt collection agency which acquired the collection operations of the law firm Mann Bracken. So, it appears that the whole operation is run, from front to back, by debt collectors who, quite obviously, have a vested interest in getting money out of consumers and not in finding out whether or not consumers actually owe the money.

The case caption is State of Minnesota v. National Arbitration Forum, No. 27-09-18550, and appears to be filed in state court with claims that NAF committed consumer fraud, deceptive trade practices and made false advertising statements.



Minnesota Attorney General Lori Swanson is to be commended for calling a spade a spade and going after NAF, which has been the target of consumer advocates for years with claims of bias and favoritism toward the debt collectors that hire it.

The whole NAF back-room favoritism and bias more clearly came to light when Deanna Richert, a former manager at NAF, filed a federal lawsuit against NAF claiming she was denied promotions and terminated last year because of her gender and age, which were, respectively, female and over 40. In the lawsuit she also revealed how NAF had a policy of favoring its big client companies and even had a nickname for them ("famous parties"). The lawsuit was picked up by the Wall Street Journal and consumer advocates quickly realized that the truth about NAF's arbitration had come out. NAF, of course, says it was doing nothing wrong.

Apparently that was the smoking gun that caused Swanson to go after NAF.

We've said for years that arbitration sucks and both Richert's lawsuit and Swanson's lawsuit are now revealing more of the truth that anyone ever did before. Maybe now people will realize that arbitration is like playing poker with a stacked deck --- and it isn't stacked in your favor, folks.

There are ways to fight back against unfair arbitration and you can read more about it here: http://www.arbitrationsucks.com/.

Burdge Law Office
Helping consumers fight back since 1978.