Alternative Dispute Resolution

An AG’s Quick Victory: Arbitration Forum Exits Credit Dispute Business

Facing a showdown with the Minnesota attorney general, the National Arbitration Forum has agreed to stop arbitrating consumer credit disputes.

NAF is the nation’s largest company arbitrating past-due credit card disputes, Business Week reports. The company will no longer accept any kind of consumer arbitrations by the end of the week.

Minnesota Attorney General Lori Swanson had filed suit against NAF last week, claiming the company had “extensive ties” to the debt collection industry. Swanson announced the settlement on Saturday, the Minneapolis Star-Tribune reports.

Swanson had alleged NAF had ties to a large debt-collection agency called Axiant through one of their owners, a hedge fund. Nearly 60 percent of the debt collection claims handled in 2006 by NAF had been filed by an Axiant predecessor, Swanson said last week at a press conference announcing the suit.

Swanson also said the NAF had worked with credit card companies to place mandatory arbitration clauses in their contracts.

In a statement, Michael Kelly of Forthright, which handles administrative services for NAF, said the company pulled out of consumer arbitrations to avoid “mounting legal costs, a challenging economic climate, and increased legislative uncertainty surrounding the future of arbitration.”

“The forum lacks the necessary resources to defend against increasing challenges to arbitration on all fronts, including from state attorneys general and the class action trial bar,” Kelly said.

The NAF will continue to arbitrate Internet domain name disputes, personal injury protection claims and cargo disputes, the Associated Press reports.

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