Alternative Dispute Resolution
Minn. AG Sues Credit Card Arbitration Company, Claims Hidden Industry Ties
Posted Jul 15, 2009 6:07 AM CST
By Debra Cassens Weiss
The Minnesota attorney general is claiming in a lawsuit that an arbitration firm widely used in consumer credit disputes has hidden its “extensive ties” to the debt collection industry.
The suit by Minnesota Attorney General Lori Swanson says the National Arbitration Forum “actively encouraged” credit card issuers to place mandatory arbitration clauses in their contracts naming the forum as the arbitrator, USA Today reports.
The suit also alleges that a group of hedge funds with ties to a large debt-collection agency called Axiant owns a stake in the forum through an entity created to hide the connection, the Pioneer Press reports. Nearly 60 percent of the debt collection claims handled in 2006 by the National Arbitration Forum had been filed by an Axiant predecessor, Swanson said.
The National Arbitration Forum “has extensive ties to the debt-collection industry," Swanson said at a press conference. "This is not an independent company and it needs to cease telling the public that it is.”
Swanson cited a study by Public Citizen that found businesses won 94 percent of 19,000 cases handled by an arbitrator from the National Arbitration Forum.
"This is as big of a case as I've ever filed as attorney general," Swanson said. “These practices attack the foundation of our legal system.”
The suit alleges violations of state consumer fraud, deceptive trade practices and false advertising laws, the Minneapolis Star-Tribune reports.
In a statement, the National Arbitration Forum said its arbitrators are part-time independent contractors, ensuring the impartiality of arbitration. The company "vigorously disagrees with any allegations of bias in the lawsuit.”
"At no point does any minority shareholder or fund have any role or influence" over the arbitration process, the company said.