RIP Arbitration (NAF, AAA)

[catleg]

July 19, 2009

National Arbitration Forum to Cease Administering All Consumer Arbitrations in Response to Mounting Legal and Legislative Challenges. American Consumers to Lose Affordable Access to Justice through Nation's Largest Administrator of Consumer Arbitration Disputes

The National Arbitration Forum (FORUM), the largest U.S. administrator of consumer arbitrations, today announced that it will voluntarily cease to administer consumer arbitration disputes as of Friday, July 24, 2009, as part of a settlement agreement with the Minnesota Attorney General.

"The National Arbitration Forum remains committed to consumer arbitration as the best and most affordable option for consumers to resolve disputes quickly and efficiently. However, 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," said Forthright CEO Mike Kelly. "Mounting legal costs, a challenging economic climate, and increased legislative uncertainty surrounding the future of arbitration have prompted the FORUM to exit the consumer arbitration arena. At this time, the costs of providing consumer arbitration services far exceed the revenue generated. Until Congress resolves the legal and legislative uncertainty the cost is simply too high for users and providers of consumer arbitration."

Legislative proposals pending in both houses of Congress threaten to eliminate pre-dispute arbitration as an effective means of alternative dispute resolution. The Arbitration Fairness Act of 2009 (S. 931/H.R. 1020) would invalidate every pre-dispute contractual arbitration agreement that is part of a consumer, financial or franchise dispute – in effect, every contract. The Fairness in Nursing Home Arbitration Act (S. 512/H.R. 1237) would eliminate pre-dispute mandatory arbitration in all nursing home contracts. Legislation before the House to create a new Consumer Financial Protection Agency (H.R. 3126) addresses arbitration and would give broad regulatory authority to restrict or eliminate all consumer arbitrations.

"The National Arbitration Forum provides fair and affordable access to justice to American consumers regardless of size of their claims. Without access to arbitration, consumer disputes will now be forced into an overcrowded and underfunded legal system, where many consumers who cannot afford attorneys will have to navigate complex court procedures," continued Kelly. "The consequence to American consumers is that there will be no meaningful alternative to costly and unpredictable litigation."

Notably, nothing in the Minnesota Attorney General’s complaint alleges that arbitration proceedings administered by the FORUM are unfair; the fairness of arbitration is ensured by the independence of the neutral arbitrators.

National Arbitration Forum consumer arbitration claims are decided by an independent panel of more than 1,600 highly experienced and impartial legal professionals, including former judges and experienced attorneys. FORUM neutrals are bound to a code of professional ethics, and decide cases outside of any influence from the FORUM or the other parties.

Source:
National Arbitration Forum

http://www.adrforum.com/newsroom.aspx?&itemID=1528&news=3

[catleg]

July 22, 2009

Nation’s Largest Arbitration Firm Pulls out of Consumer Disputes

Last night, citing Sunday’s settlement between Minnesota’s attorney general and the National Arbitration Forum (NAF), the American Arbitration Association (AAA) announced that it will no longer participate in debt collection arbitration disputes. The group, which is the largest provider of arbitration services in the country, said that it is alarmed by the NAF suit and will seek the establishment of “some standards or safeguards.”

While last night’s announcement was a positive step, it does little to protect consumers from abusive arbitration clauses that are slipped into the fine print of everything from cell phone contracts to nursing home agreements. Unlike NAF’s settlement, AAA is not banned from resuming its work with debt collection disputes, and may still continue nursing home, employment or any other consumer forced arbitrations.

Today, the House Oversight and Government Reform’s Subcommittee on Domestic Policy will hold a hearing on forced arbitration, and there are currently two bills under consideration that would curb this abusive practice. The Arbitration Fairness Act (S. 931 / H.R. 1020) would ensure that any decision to enter into arbitration by a consumer is voluntary, and not forced on them by the fine print of a contract and the Fairness in Nursing Home Arbitration Act (S. 512 / H.R. 1237) would eliminate forced arbitration clauses in nursing home contracts.

In a statement released this morning, AAJ VP of Public Affairs Linda Lipsen said “For years, consumers have seen first-hand how corporations and private Wall Street forums take advantage of everyday people via forced arbitration clauses…[and] it has become clear that Congress must step in to protect consumers.” She went on to note that these groups have always “had ‘guidelines’ they either didn’t follow or outright abused.” And that “[u]ntil Congress acts, corporations…[continue] to use one-sided forced arbitration as a weapon against consumers and a shield to avoid accountability.

Source:
InjuryBoard.com

http://voices.injuryboard.com/miscellaneous/nations-largest-arbitration-firm-pulls-out-of-consumer-disputes.aspx?googleid=267570

[treehugger1]

Great post, CatLeg! I posted a few comments on the collections forum related to how "arbitration" can be "arbitrary" from state-to-state. I am not surprised that State Attorney Generals' offices are questioning the validity of the federal arbitration rulings. It was bound to happen at states-rights for consumers came up against federal codes that underscore the states.

The NAF may seem to be "working in defense of the consumer," but the truth is that the federal arbitration rulings DO NOT supercede a state's ability to offer more protection for consumers.

And, in addition, everyone who has challenged the NAF has obviously cost the NAF and creditors more than they thought was possible. There are a few silver linings in this recession. LOL

[hamletsdead]

This is great news, since the NAF was not exactly consumer friendly, and marketed their services to credit providers all over the country. It's always a concern when the alleged "neutrality" of the ADR provider is called into question, and there are scores (if not more) of complaints about the NAF being pro-creditor, and investigations and lawsuits by multiple attorney generals and city attorneys (e.g., San Francisco) about the unfairness of the forum.

[frogger]

This is great news. I have always felt that mandatory arbitration violated due process.