Observers on both sides of the mandatory-arbitration debate expressed surprise Monday at the National Arbitration Forum's swift agreement with the Minnesota Attorney General to bow out of hearing consumer arbitration disputes in the United States, most of which are related to credit card accounts. "I'm pretty stunned, frankly, at how quickly this has played out," says Graham Steele, a civil justice lobbyist for Public Citizen, an organization that long has fought against mandatory-arbitration clauses in consumer contracts. Public Citizen published a report in 2007 that calculated forum arbitrators ruled for businesses in 95% of 34,000 cases filed in California between Jan. 1, 2003, and March 31, 2007. Proponents of mandatory arbitration of consumer complaints expressed disappointment at the swift settlement. "It's terrible. The Minnesota attorney general essentially bludgeoned the National Arbitration Forum into submission," Alan Kaplinsky, a partner at Ballard Spahr Ingersoll and Andrews, tells CardLine. The Philadelphia-based law firm helped several major issuers to develop and defend mandatory-arbitration clauses in their contracts with cardholders. The forum heard virtually all collection arbitration cases in the United States, Kaplinsky says, and it arbitrated far more card-related cases of all kinds than did its two competitors, Irvine, Calif.-based JAMS Inc. and the New York-based American Arbitration Association. "It's a very bad settlement from the standpoint of not only card issuers but also consumers and the courts," Kaplinsky says, noting the settlement will force more consumer cases into public courtrooms already overloaded with backlogs of cases and will open the door for expensive consumer class-action complaints. The forum's sudden departure from arbitration of card cases "could not come at a worse time for the issuers," Ronald Mann, a professor of law and co-chair of the Charles E. Gerber Transactional Studies Program at Columbia Law School, tells CardLine. "I don't think, in the long run, the loss of mandatory arbitration would be all that devastating for card issuers," Mann says. "But things are tight right now, and I do think it would make the short run even harder for them."


Subscribe Now

Authoritative analysis and perspective for every segment of the payments industry

14-Day Free Trial

Authoritative analysis and perspective for every segment of the industry