Last week the Minnesota attorney general Lori Swanson, filed a lawsuit against the National Arbitration Forum, the largest arbitration company in the country for consumer credit disputes, alleged that the agency deceived consumers into thinking it was a neutral arbitrator for debt collection matters, when in fact it was working FOR the creditors.
Swanson said that credit card companies, banks, retail lenders, and cell phone companies increasingly place, in the fine print of their consumer agreements, mandatory predispute arbitration clauses.
Through those mandatory arbitration clauses, consumers waive, in advance, their right to have their day in court if a dispute arises and agree to have a single company act the sole provider for arbitration services and that single company is more often that not the National Arbitration Forum.
The National Arbitration Forum
If that name sounds familiar to you domainers, its because guess who decides URDP cases; right
So today, just a week after filing the suit, the Attorney General office announced that they had reached a settlement with the Forum.
While the specific terms of the settlement were not disclosed, the Forum agreed to stop arbitrating consumer credit disputes all together. Under the settlement, the company has a week to stop consumer arbitration matters, but can continue servicing Internet domain name disputes, personal injury claims, and other cases.
Guess who owns the National Arbitration Forum, a New York hedge fund that also operates a debt-collection agency. You eyes are not deceiving you. The arbitrator of debt collection claims, is owned by the debt collectors.
Now first let’s read the allegations that the Attorney General made last week against the Forum and then I will have comments:
“””The Attorney General’s suit alleges that the National Arbitration Forum represented to consumers and the public that it is independent and neutral, operates like an impartial court system, and is not affiliated with and does not take sides between the parties.
“The company tells consumers, the public, courts, and the government that it is independent and operates like an impartial court system. In fact, it has extensive ties to the collection industry—ties that it hides from the public,” said Attorney General Swanson.
The lawsuit alleges that the National Arbitration Forum, while holding itself out as impartial, works behind the scenes—alongside creditors and against the interests of ordinary consumers—to convince credit card companies and other creditors to insert arbitration provisions in their customer agreements and then appointing the Forum to decide the disputes. The lawsuit alleges that the Forum pays commissions to executives whose job it is to convince creditors to put mandatory arbitration clauses in their customer agreements. The suit alleges that the Forum does this to generate arbitration filings in the Forum—and hence, revenue—for itself.
The lawsuit alleges that, despite telling consumers and the public that it is not affiliated or aligned with the collection industry, the Forum in fact has financial ties to the collection industry. The lawsuit alleges that, beginning in 2006 and through 2007, Accretive—a family of New York private equity funds—engineered two transactions. In the first transaction, Accretive formed several equity funds under the name “Agora” (meaning “Forum” in Greek), which invested $42 million in the Forum.
In the second transaction, three of the country’s largest debt collection law firms—Mann Bracken of Georgia, Wolpoff & Abramson of Maryland, and Eskanos & Adler of California—merged into one large national law firm called Mann Bracken.
Accretive then acquired the majority interest in a debt collection agency called Axiant, which acquired the collections operations of Mann Bracken. Through these transactions, Accretive took control of one of the country’s largest debt collection enterprises and became affiliated with the Forum, the country’s largest consumer collection arbitration company. The lawsuit alleges that Accretive principals remain actively involved with the Forum.
The lawsuit states that, in 2006, the Forum processed just over 214,000 consumer collection arbitration claims, of which 125,000, or nearly 60 percent, were filed by the above law firms.
Swanson said that the Forum was aware of the affiliation problem in 2006 when it negotiated its relationship with Accretive. She pointed to an email from an officer of the Forum to the hedge fund stating: “…we should certainly plan for unwinding any deal in the event shared ownership becomes an acute issue.”
Swanson was joined at the announcement of the suit by Richard Neely, retired Chief Justice of the West Virginia Supreme Court of Appeals. Upon retirement, Justice Neely was appointed as an arbitrator by the Forum but stopped receiving cases after he refused to award attorneys’ fees to creditors that he did not believe were allowed under West Virginia law. Neely praised Swanson’s lawsuit, saying, “I am happy that a government official has stepped in to try and address this problem. This company tilts the playing field toward creditors and makes a mockery of our legal system,” he said.””
Ok so much for the allegations of the Attorney General.
Now for my thoughts.
This is the outfit that ICANN has contracted with to handle domain disputes filed through UDRP’s
Of course in settling the case the Forum admitted no guilt.
However giving up handling credit disputes forever, just one week after the suit was filed tells me all I need to hear.
The question is if this outfit is not fit to hear disputes between consumers and debt collectors, how come we get stuck with them to decide issues involving our valuable domain assets?
If they represented themselves to the public as being a fair and uninterested party to settle disputes, only to find that they are owned by one side of the dispute, I think they should be immediately disqualified from hearing another domain dispute.
I think ICANN should immediately halt any and all pending UDRP’s in front of the Forum.
I think ICANN should immediately begin the process of finding a new company to replace the NAF to handle UDRP disputes.
I think having read the allegations of the Attorney General, that every decision made by the Forum pursuant to a UDRP in which a domain was ordered transferred be immediately made appeal-able to the new company that ICANN selects to hear NAF’s caseload of UDRP’s in the future.
Read the allegations, read the settlement and then you tell me how can this company be trusted to fairly and unbiasedly decide the fate of your property.