Minnesota Attorney General’s 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 Minnesota’s complaint, NAF is allied with debt collectors for the nation’s 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 Citizen’s 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 country’s largest debt collection law firm, and that the hedge fund’s principals coordinated with NAF to try to “kill or weaken” the proposed Arbitration Fairness Act. The attorney general’s allegations, if true, are two among many indicating that NAF has misled the public about its neutrality, only confirming Public Citizen’s reports.

Minnesota’s 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.

Minnesota’s suit alleges violations of Minnesota’s 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.

* Congress Watch is a department of Public Citizen. It is not a stand-alone organization. If you do not have space to include Mr. Arkush’s entire title, please refer to him as David Arkush of Public Citizen.

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