Wednesday, July 22, 2009

AAA, NAF Halt Consumer Debt-Collection Cases

Scales Today's Wall Street Journal (subscription required) reports:

Two major arbitration firms are backing away from the business of resolving disputes between customers and their credit-card and cellphone companies, throwing into disarray a controversial system that prevents unhappy consumers from filing lawsuits.

The American Arbitration Association said Tuesday it will stop participating in consumer-debt-collection disputes until new guidelines are established. Its decision came two days after another big group, the National Arbitration Forum, said it would stop accepting new cases as of Friday.

The NAF halted its consumer debt-collection cases only a week after the Minnesota attorney general filed suit against it alleging consumer fraud.  The arbitration provider has been plagued by allegations that it had ownership and financial ties to the debt collection firms, and that it routinely dropped from its rosters arbitrators who ruled in favor of consumers.  For NAF to have caved so quickly -- I'm betting there was smoking-gun evidence that NAF wants to bury.

This doesn't directly affect employment cases or other consumer cases, but may do so indirectly as Congress considers the pending Arbitration Fairness Act.


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