General Sues National Arbitration Forum — Minnesota Attorney

Attorney general alleges deceptive practices in credit card disputes.

The Minnesota Attorney General has filed a lawsuit against National Arbitration Forum, one of the largest domain name dispute providers under UDRP. The lawsuit does not pertain to domain arbitration, but instead to credit and collection disputes.

The Attorney General alleges “that [National Arbitration Forum] misrepresented its independence and hid from consumers and the public its extensive ties to the collection industry.”

In most credit card terms and conditions, credit card users agree to arbitration in the event of a credit card dispute. As stated by a press release from the Attorney General:

“The firm tells consumers, the public, courts, and the government that it is independent and operates like an impartial court system. In fact, it has extensive ties to the collection industry—ties that it hides from the public,” stated Attorney General Swanson.

The lawsuit alleges that the National Arbitration Forum, while holding itself out as impartial, works behind the scenes—alongside creditors and against the interests of ordinary consumers—to convince credit card firms and other creditors to insert arbitration provisions in their client agreements and then appointing the Forum to decide the disputes. The lawsuit alleges that the Forum pays commissions to executives whose job it is to convince creditors to put mandatory arbitration clauses in their client agreements. The suit alleges that the Forum does this to generate arbitration filings in the Forum—and hence, revenue—for itself.

National Arbitration Forum has posted a media statement regarding the lawsuit, essentially saying that it is independent.

In 2006 NAF processed 214,000 consumer collection arbitrage claims, as stated by the lawsuit. That makes the low four figure number of domain arbitration cases seem like modest potatoes.