Cross-posted from Tort Deform
Adrianne was forced into arbitration by debt collectors for an alleged debt she owed on an MBNA credit card. The dispute was handled by the National Arbitration Forum or (NAF). The entire proceeding went on without her knowledge or a chance to clear it up. It would be bad enough if the story ended there, but it gets worse. Adrianne has never held an account with MBNA and she didn’t owe the money. She was notified of the alleged debt and the secret arbitration proceeding 3 months after the award was granted to the debt collector. She was told that she owed close to $15,000.00. When she inquired about the mysterious account and the debt, the sum suddenly changed to $8,000.00. Despite the fact that Adrianne never held an account with MBNA and did not owe the debt, NAF refuses to vacate the award.
There are three major binding mandatory arbitration service providers, NAF, AAA, and JAMS. Long known to any consumer forced into arbitration proceeding, like Adrianne, the NAF is notorious for its biased approach to arbitration. Based on communication between the Give Me Back My Rights Campaign, consumers and consumer attorneys, there are now vastly more complaints about NAF than AAA or JAMS. These complaints illustrate that NAF is more analogous to an in-house debt collector than an independent neutral alternative to dispute settlement.
In 2005 NAF purports to have resolved legal claims worth more than 3 billion brought to it by disputing legal parties. The claims are brought largely by credit companies who insert mandatory NAF arbitration clauses in their mortgage, loan and credit documents. The NAF states that that the number of legal claims it has resolved annually has tripled over the years 2003 to 2005. (See Complaint, Legacy Capital Partners & Radnor Capital Advisors v. National Arbitration Forum, Paul R. Rosen). For consumers, this translates into triple the complaints about prejudiced proceedings.
In this billion-dollar industry, competition is steep, as arbitration service providers fight for repeat business from big banks. In advertisements targeting big corporate accounts, NAF urges credit card companies to draft mandatory arbitration clauses that name NAF as the provider because NAF is the "alternative to the million dollar lawsuit." They promise potential corporate clients that NAF will "make a positive impact on [their] bottom line." NAF boasted about their "loser pays" rule that requires any consumer who does not win his case to pay the finance company’s attorney fees. (See Brief, McQuillen v Check n’ Go, Paul Bland)
As Adrianne learned in her dispute with MBNA, NAF has different rules for consumers. NAF is known for ruling for lenders over consumers when they don’t owe the debt, even in cases of identity theft. They issue rulings against consumers who had never received notice that the case was filed. NAF consistently breaks its own rules in ways that harm consumers, like regularly extending deadlines for large lenders but never for consumer debtors. (See, NAF Wall of Secrecy Crumbling, Paul Bland)
Policy makers are finally starting to pay attention. In 2002 Congress decided that car dealers were burdened with unequal bargaining power against big manufacturers. It banned pre-dispute binding mandatory arbitration clauses in contracts between "small" car dealers and "powerful car manufacturers." It gave car dealers back their rights to take car manufacturer disputes to court. In 2006 Congress decided to protect servicemen, servicewomen and their families from predatory credit lenders. It banned unjust pre-dispute mandatory arbitration clauses in all loans to the military, giving military personnel who’d been victims of unjust contracts the right to take predatory lenders to court. Congress should recognize that pre-dispute binding mandatory arbitration hurts everyone.
The Give Me Back My Rights Campaign is a diverse group of over 25 consumer and civil rights advocacy organizations that seek the end of binding mandatory arbitration agreements for all. We are rallying support of a federal law that would simply declare binding mandatory arbitration, between individuals and big businesses, unenforceable.
If you feel your rights have been violated by a binding mandatory arbitration clause, please share your story, and help put an end to these unjust practices.
For more information about the Give Me Back My Rights Campaign or to tell us your story please contact Valkyrie Hanson at Valkyrie@stopbma.com, or go to www.GiveMeBackMyRights.com.