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Minnesota Attorney Generals Suit Shines Light on Unfair Arbitration Practices

July 15, 2009

Minnesota Attorney Generals Suit Shines Light on Unfair Arbitration Practices

Statement of David Arkush, Director, Public Citizen’s Congress Watch Division

We applaud Minnesota Attorney General Lori Swanson for pursuing the National Arbitration Forum (NAF) for deceiving the public with claims of neutrality when, according to Minnesotas complaint, NAF is allied with debt collectors for the nations largest credit card providers. The allegations in the suit Minnesota filed Tuesday reinforce what many advocates of fair arbitration have known for a long time: Arbitration companies treat large corporations as their clients, collaborating with them to deprive consumers of their rights under critical consumer protection laws.

One of the allegations in the complaint is that the National Arbitration Forum, the U.S. Chamber of Commerce and others have waged a coordinated effort to discredit Public Citizens 2007 report showing that big corporations win 95 percent of the time before NAF. The complaint also alleges that a New York hedge fund owns a major stake in both NAF and the countrys largest debt collection law firm, and that the hedge funds principals coordinated with NAF to try to kill or weaken the proposed Arbitration Fairness Act. The attorney generals allegations, if true, are two among many indicating that NAF has misled the public about its neutrality, only confirming Public Citizens reports.

Minnesotas lawsuit is an important effort to protect its citizens from the inherent corruption of the forced arbitration system. Congress must now protect all Americans by passing legislation to end forced arbitration. The Arbitration Fairness Act (H.R. 1020 and S. 931) would do just that, protecting consumers, employees and franchisees. The Consumer Financial Protection Agency Act (H.R. 3126) would create an agency that is empowered to protect consumers from forced arbitration in contracts for financial products like credit cards.

Minnesotas suit alleges violations of Minnesotas consumer-fraud, deceptive-trade-practices, and false-advertising laws. It comes as the U.S. House of Representatives considers H.R. 3126, sponsored by Rep. Barney Frank (D-Mass.), and the House and Senate consider H.R. 1020 and S. 931, sponsored by Rep. Hank Johnson (D-Ga.) and Sen. Russ Feingold (D-Wis.), respectively.