[IMGCAP(1)]

By Friday, the National Arbitration Forum Inc. no longer will arbitrate complaints between credit cardholders and issuers or debt-collection agencies across the United States. The agreement settles a complaint filed last week in which the Minnesota Attorney General accused the St. Louis Park, Minn.-based company of violating state laws by allegedly engaging in consumer fraud, false advertising and deceptive trade practices. The lawsuit charged that from 2006 through 2007, a group of New York-based private equity funds, called Accretive, formed several other equity funds under the name Agora, which invested $42 million in the National Arbitration Forum. In a second deal, three of the country's largest debt-collection law firms merged to create a firm called Mann Bracken. Accretive gained majority interest in a debt-collection agency called Axiant, which had acquired Mann Bracken's collections operations, the complaint says. "Through these transactions, the Accretive hedge-fund group simultaneously took control of one of the country's largest debt-collection agencies and became affiliated with the Forum, the country's largest debt-collection arbitration company," the complaint alleges. In a statement issued last week, Minnesota Attorney General Lori Swanson said those ties in ownership call into doubt the impartiality of the forum's arbitrators. "The company tells consumers, the public, courts and the government that it is independent and operates like an impartial court system," Swanson said. "In fact, it has extensive ties to the collection industry–ties that it hid from the public." Forum representatives declined an interview on the settlement, but in a statement the company denies any wrongdoing. "The National Arbitration Forum remains committed to consumer arbitration as the best and most-affordable option for consumers to resolve disputes quickly and efficiently," Mike Kelly, CEO of Forthright, said in the statement. "However, the forum lacks the necessary resources to defend against increasing challenges to arbitration on all fronts, including from state attorneys general and the class action trial bar." (Forthright is an independent company spun off from National Arbitration Forum in late 2007. The forum contracts Forthright to administer its complaints, and all but five former forum employees are now formally employed by Forthright, a spokesperson says.) In recent years, more and more credit card issuers have routed the bulk of their disputes with cardholders to the forum for mandatory arbitration. In 2006, the forum arbitrated some 125,000 cases across the United States, 60% of which were filed by law firms that became part of Mann Bracken, the complaint alleges. Under the agreement, the forum no longer will arbitrate consumer-debt disputes but will continue to arbitrate Internet domain-name disputes and claims related to cargo transport and personal injuries.

 

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