NAF Settlement Underscores Need for Congress to Pass Arbitration Fairness Act

For Immediate Release: July 20, 2009
Contact: Kerri Axelrod
202-965-3500 x369
AAJ Press Room

NAF Settlement Underscores Need for Congress to Pass Arbitration Fairness Act

The following is a statement from American Association for Justice President Les Weisbrod regarding the settlement by the Minnesota Attorney General with the National Arbitration Forum:

“The appalling business practices of the National Arbitration Forum (NAF) illustrate how forced arbitration fails to protect consumers from predatory financial lenders and other negligent corporations.

“The NAF operated by creating an economic incentive to rule against consumers in favor of credit card companies and debt collectors; a far cry from the ‘fair’ and ‘unbiased’ forum they marketed.

“While the settlement with the attorney general is a major win for consumers, the NAF is not the only company that uses forced arbitration against consumers. This settlement underscores why Congress must pass legislation that makes arbitration voluntary, not forced upon consumers by slipping it into the fine print of everyday contracts.

“Attorneys have long used voluntary arbitration and mediation as an effective and efficient manner to resolve disputes. But when arbitration is forced upon consumers in a pre-dispute, non-negotiable contract, it becomes an abusive weapon.

“The NAF settlement should convince all skeptics that forced arbitration is biased, one-sided, and operates to accommodate predatory corporations at the expense of consumers. The time has come for Congress to ban forced arbitration once and for all.”

Two bills have been introduced in Congress to stem the abusive practice of forced arbitration. The bipartisan Arbitration Fairness Act (S. 931 / H.R. 1020), sponsored by Sen. Russ Feingold (D-Wis.) and Rep. Hank Johnson (D-Ga.), would ensure that the decision to arbitrate is made voluntarily and after a dispute has arisen, so corporations cannot manipulate the arbitration system in their favor at the expense of consumers and employees. The bipartisan Fairness in Nursing Home Arbitration Act (S. 512 / H.R. 1237), introduced by Sens. Mel Martinez (R-Fla.) and Herb Kohl (D-Wis.) and Rep. Linda Sanchez (D-Calif.), would eliminate forced arbitration clauses in nursing home contracts.

On Wednesday, a House Oversight and Government Reform subcommittee is scheduled to hold a hearing on the use of forced arbitration in consumer debt collections. Invited to testify is the Minnesota Attorney General and the COO of NAF.

Forced arbitration clauses are hidden in the fine print of everyday consumer contracts from job applications and nursing home agreements to credit card billing inserts and mortgage loans. To learn more, visit www.justice.org/forcedarbitration.

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As the world's largest trial bar, the American Association for Justice (formerly known as the Association of Trial Lawyers of America) works to make sure people have a fair chance to receive justice through the legal system when they are injured by the negligence or misconduct of others—even when it means taking on the most powerful corporations. Visit http://www.justice.org/newsroom.