Alternative Dispute Resolution

Logistical Issues for Banks After AAA Pulls Out of Consumer Arbitration

A second company is getting out of the business of arbitrating consumer credit disputes.

The American Arbitration Association announced Tuesday that it will stop participating in consumer debt disputes with credit card and cell phone companies “until some standards or safeguards are established,” the Wall Street Journal (sub. req.) reports.

The news comes just days after another arbitration company, the National Arbitration Forum, agreed to stop arbitrating consumer credit disputes to settle a lawsuit filed by the Minnesota attorney general. The suit had alleged NAF had “extensive ties” to the debt collection industry that weren’t revealed to consumers.

Chris Daniel, a lawyer with Paul, Hastings, Janofsky & Walker, said the development has big implications. “This is going to present significant operational and logistical issues for banks that issue credit cards,” Daniel told the Wall Street Journal.

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