Gallagher & Associates Team

Gallagher & Associates Team

Friday, November 13, 2009

Arbitration Clauses Under Attack

Minnesota's Attorney General, Lori Swanson, recently filed suit against the National Arbitration Forum, an allegedly independent body that is the forum for resolution of credit card disputed. The suit charged that the dispute-resolution company engaged in "deceptive practices" in hiding its ties to the debt-collection and banking industry.

Most credit card companies (as well as cell phone providers and employers) include language in their agreements that disputes must be referred to arbitration and the consumer has waived the right to file a lawsuit. Most credit card disputes are handled each year through arbitration. Ironically, Congress is presently considering whether to ban mandatory arbitration clauses in contracts, and credit card companies.

The National Arbitration Forum is one of the largest providers of arbitration services for the credit card industry. The lawsuit alleged that the company "actively encouraged" issuers to place mandatory arbitration clauses in their contracts and sometimes "assist(ed)" issuers in arbitration claims against consumers.

The National Arbitration Forum, claims that its contractors are "independent," ensuring the "impartiality" of arbitration. NAF further responded stating that "at no point does any minority shareholder or fund have any role or influence" over the arbitration process. The lawsuit could serve as a catalyst for national reform of the arbitration process.

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