In March, Dennis J. Herrera, San Francisco’s city attorney, sued National Arbitration Firm, (NAF), a for-profit company based in Minneapolis which specializes in resolving claims by banks, credit card companies, and major retailers that contend consumers owe them money. In the suit, Herrera accused the NAF, which handles many firms in California state court, of churning out awards for creditors without sufficient justification. The lawsuit cites state records showing that NAF handled 33,933 collection arbitrations in California from January, 2003, through March, 2007. Of the 18,075 that weren’t dropped by creditors, otherwise dismissed, or settled, consumers won just 30, or 0.2%, the suit alleges.
Specific allegations:
- Some current and former NAF arbitrators say they make decisions in haste—sometimes in just a few minutes—based on scant information and rarely with debtor participation.
- Consumers who have been through the process complain that NAF spews baffling paperwork and fails to provide the hearings that it promises.
- Corporations seldom lose. In California, the one state where arbitration results are made public, creditors win 99.8% of the time in NAF cases that are decided by arbitrators on the merits, according to the above mentioned lawsuit.
In a BusinessWeek Article, one former arbiter interviewed stated some of the unsavory practices:
A current NAF arbitrator speaking on condition of anonymity explains that the presentation reflects the firm’s effort to attract companies, or “claimants,” by pointing out that they can use delays and dismissals to manipulate arbitration cases. “It allows the [creditor] to file an action even if they are not prepared,” the arbitrator says. “There doesn’t have to be much due diligence put into the complaint. If there is no response [from the debtor], you’re golden. If you get a problematic [debtor], then you can request a stay or dismissal.” When some creditors fear an arbitrator isn’t sympathetic, they drop the case and refile it, hoping to get one they like better, the arbitrator says.
Elizabeth Bartholet, a Harvard Law School professor and advocate for the poor, worked as an NAF arbitrator in 2003 and 2004 but resigned after handling 24 cases. NAF ran “an unfair, biased process,” she said in a deposition in September, 2006, in an Illinois state court lawsuit. NAF isn’t named as a defendant in the pending case, which challenges a computer maker’s use of an NAF arbitration clause. Bartholet said that after she awarded a consumer $48,000 in damages in a collections case, the firm removed her from 11 other cases. “NAF ran a process that systematically serviced the interests of credit-card companies,” she says in an interview.
In addition, the NAF convinces collection agency law firms to solicit credit card companies on its behalf in return for a percentage of the fees won in successful cases.
On some occasions, it tries to drum up business with the aid of law firms that represent creditors. Summaries of weekly NAF business development meetings from 2004 and 2005, which are labeled “confidential,” show it enlisted Wolpoff & Abramson and another prominent debt collection law firm, Mann Bracken, to help win the business of companies such as GE’s credit-card arm. When creditors succeed, the law firms seek fees of 15% or 20% of awards, which are added to judgments and billed to debtors. Atlanta-based Mann Bracken surfaces in a November, 2004, NAF document that states: “Work with Mann to begin its taking lead on GE as it relates to Mann running the program for it.”
Background for the whole arbitration Process:
- A credit-card company or retailer files a claim with the National Arbitration Forum
- The creditor notifies the consumer of the claim; 40% of all cases settle
- Cases that don’t settle are assigned to arbitrators, who are lawyers and sometimes former judges
- Consumers can respond in person or in writing, but for various reasons, the vast majority don’t
- Arbitrators decide whether to make awards, which can include interest and creditors’ legal fees
So how about you - have you been involved in an arbitration suit? What kind of experiences have you had?
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5 responses so far ↓
1 Sofia Kim // Jun 10, 2008 at 1:35 pm
Credit card debt is on its all time high with today’s economy. Hopefully people can obtain the help they need to get out of debt. Thanks for the article!
2 Templar // Jun 11, 2008 at 7:28 am
Congratulations are in order. Another victory against the NAF Arbitration Scam. My lawyer buddy’s son received one of those Arbitration claims on an account that went bad [disputed]. My buddy challenged their [jdb] jurisdiction before the arbiter (National Forum) and got an order in the mail today “dismissing” the action for lack of jurisdiction! The Forum threw it out because they couldn’t prove the boy ever agreed to arbitrate; same case law as was used on my 2007 issue. [See my other blogger mouth entries]
Oh, yeah, one other item: My buddy also put in the pleadings that the Forum could be sued if it could be proven that junk debt was unilaterally being turned into arbitration awards by the Forum. Guess they didn’t dig that. So, case dismissed.
Other: Beaten this arbitration scam from both the front and back ends. NY Courts are looking at these arbitration motions for a judgment with a jaundice eye, but ya gotta go to Court to avoid default judgments. As this bog is beginning to see these judgments are sold to JDB’ers.
Expect epic court battles this year. I’ll keep the bog informed with the outcomes.
3 trueq // Jun 11, 2008 at 7:43 am
Had my kangaroo NAF hearing today!
No decision yet because I nailed them on Wisconsin Statue 425.109, with fresh WI case law that all transactions need to be evidenced back to a zero statement, MBNA did not have it!
Naturally, the arbitrator is giving them until Friday to get it.
If they get it, kangaroo court will rule against me.
If they don’t, I might have actually beat the NAF.
On a very good note…
Arbitrator admitted he is taking a bath on “this one”. He’s spent 10 hours reviewing all the paperwork, motions and “evidence”, flying back and forth between myself and Wolpoff.
Arbitrator admitted he is no longer going to be an arbitrator after this experience.
Wolpoff lawyer admitted they will make nothing on this claim, given all the time I tied them up! ($6000 claim!)
I won, even if the kangaroo still decides to kick me with an illegal award.
So by God! Everyone caught in NAF demand the hearing! I may write a book on how to clog the NAF and stop their money mill with hearings.
I gobbled up 2 hours of the arbitrators time in the hearing and got cut off!
4 John Sheakley // Jun 17, 2008 at 4:44 pm
I am a named plaintiff in “The People of the State of California, acting by and through San Francisco City Attorney Dennis J. Herrera vs. NAF, FIA Card Services, and Columbia Credit Services.”
Two real estate agents falsely represented a timeshare contract. MBNA would not cancel or place the transaction into dispute. MBNA acknowledged receipt of my letters and faxes before the 60-day deadline to place the transaction into dispute and then denied that my letters and faxes were received within 60 days. The NAF would not reply to my request to know my arbitration case code number, i.e., was it the same case code number for cases the selected arbitrator decided 99.8% in favor of the credit agencies? The NAF would not reply to my request for the date, time, and location for the arbitration (never has been provided). MBNA’s attorney, Wolpoff & Abramson did not acknowledge my acceptance of the NAF’s option for a Document Hearing where I reside. Wolpoff & Abramson did not acknowledge an invitation for mediation and MBNA said it is too late for mediation. With no notice of the date, time, or location for the arbitration, the NAF awarded MBNA’s attorney the disputed amount plus $4,200.10 in attorney’s fees. Wolpoff & Abramson provided a copy of MBNA’s apology to the NAF for not responding to the NAF’s request for additional information before the NAF’s judgment. Wolpoff & Abramson mailed correspondence to my new address and then claims that they served (still no proof of service) time-sensitive legal documents to my old address.
5 xs // Jul 19, 2008 at 1:43 am
it is a story state of the California that a person that work in the credit card and preform the duties.contact of the agents of the real estate with the timeshare MBNA dead line 60 days .
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