ARBITRATION TURMOIL – I LOVE IT 150 150 Lauren Ellerman

Ok, I am not contradicting myself or at least I don’t think I am. In employment cases (my other area of practice) I do not hate arbitration agreements. Sometimes, you can get a fair result, cheaper and quicker when you have two equal parties agreeing to avoid the Court system.

BUT when it comes to comsumer cases (credit cards, healthcare contracts etc.) I sing a different tune. I do not like arbitration agreements (yes, sounds like I do not like green eggs and ham..) Why? I believe that victims of corporate abuse or negelct, should have a right to seek their day in court and in arbitration, you are denied that right.

So imagine my delight, joy, and surprise when the Wall Street Journal today front page, had an article on Arbitration Turmoil in Credit card services.

The article addresses a Minn. company, NAF that has long held the market on consumer arbitration agreements.

What do I mean by that? When you apply for a credit card, the application likely contained language that stated: You hereby agree that any and all disputes between you and Company will be handled in Arbitration under the rules of NAF.” Now, I am oversimplifying, but when you signed said application, you agreed (likely unknowingly) to wave your right to sue the credit card company in your local court. You also agreed to allow NAF, a company in Minnesota, to be your judge and jury using Minnesota law.

Well, why is that so bad?

According to the Wall Street Journal article today, “In a July complaint, the Minnesota attorney general’s office alleged NAF deceived consumers and engaged in false advertising. Consumers didn’t realize NAF was financially affiliated with “one of the country’s major debt collection enterprises,” the complaint alleged…

The complaint also alleges that “While telling consumers that it was an impartial arbitrator, NAF worked closely with creditors, the regulator claimed, including drafting claims against consumers.”

Does it sound fair to you? You are asking a third party to decide a case for you, and the third party is an employee of a company, and the company makes money on people who can’t pay their credit card debt.

It would be like a Board member of a hospital, serving as a neutral third party “judge” against a physician who works at his hospital. Would you feel justice was being served by such a conflict of interest?

Of course not.

So what happened after the Minnesota Attorney General’s office filed the complaint? According to the WSJ article “NAF settled the case with Minnesota Attorney General Lori Swanson in July without admitting the charges. It agreed in the settlement to stop arbitrating credit-card cases nationwide.”

WOW. In turn, another huge Arbitration company (who we see all the time in healthcare and employment contracts) American Arbitration Association also agreed not to arbitrate any more credit card contracts.

Good news consumers. Lets home Congress will listen when we tell them Arbitration Agreements should not be used in health care contracts either.

Until then, I would guess 99% of Virginia nursing homes and assisted living facilities have these provisions in their contracts. Be aware!

About the author

Lauren Ellerman

In 2011, Lauren Ellerman was named "Young Lawyer of the Year" by the Roanoke Bar Association for her work in the community. To speak with Lauren about your personal injury case, contact her at

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