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Credit Card “Arbitration Agreements” Under Attack

If you own a credit card, you have probably given up your right to a trial in the event of any dispute with the credit card company. You probably didn’t know that when you signed up for the card because the information was buried in the fine print. You most certainly did not know that the “arbitration” you agreed to was rigged in favor of the credit card companies.

If you own a credit card, you have probably given up your right to a trial in the event of any dispute with the credit card company.  You probably didn’t know that when you signed up for the card because the information was buried in the fine print.  You most certainly did not know that the “arbitration” you agreed to was rigged in favor of the credit card companies.

The truth about the relationship between credit card companies and the National Arbitration Forum (NAF) is that they work together to collect debts, according to a congressional report.  The report’s findings include:

“Virtually all NAF “consumer arbitrations” are in fact debt collection actions brought by creditors or assignees of creditors, not by the consumers themselves, and almost all consumer arbitrations are decided in the creditor’s favor.  (Staff Report of the Domestic Policy Subcommittee Majority Staff Oversight and Government Reform Committee House of Representatives).

The report also cited major differences between court proceedings and “consumer arbitrations”.  These include:

  • A lawsuit must be served on a defendant by a neutral third party/ Notice in the arbitration is given by the credit card company
  • A judge is required to follow the law and is subject to review/  An arbitrator is allowed to ignore the law and is not subject to review
  • A judge is required to be neutral/ The NAF advertises to collection companies that when you explain the process to debtors “they hand you the money”
  • Judges are randomly assigned to a case and have no interest in the outcome/ Arbitrators are assigned by the NAF and have a financial interest in getting more cases.  One arbitrator was permanently disqualified by the NAF because he found in favor of too many consumers.

The state of Minnesota filed a lawsuit against the NAF.  The lawsuit alleged that the NAF had close financial ties to the collection industry.  The suit also claimed that the NAF claimed to be neutral and independent while working behind the scenes to convince credit card companies to add arbitration clauses to their agreements.  The state of Minnesota reached a settlement that required the NAF to stop conducting consumer arbitrations in Minnesota. 

If you have been required to arbitrate a consumer dispute with the NAF contact dgahnz@lawtoncates.com for more information about your rights.

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