United States: National Arbitration Forum to Cease Administering Consumer Arbitrations: Many Consumer Arbitration Provisions May Need Revision

Last Updated: July 31 2009
Article by Evan M. Tager, Archis A. Parasharami and Kevin S. Ranlett

Originally published July 20, 2009

Keywords: National Arbitration Forum, NAF, consumer arbitrations, civil lawsuit, consumer debts, credit card companies, arbitration proceedings

On July 19, 2009, the National Arbitration Forum (NAF), one of the largest arbitration providers in the United States, announced that by July 25, 2009, it would no longer accept new arbitrations that involve consumers.

The NAF's decision to stop administering consumer arbitration proceedings is part of a settlement of a recently-filed civil lawsuit against the NAF by the Minnesota Attorney General. The lawsuit contended that the NAF failed to disclose that it had financial ties to and was biased towards some law firms specializing in debt collection that had instituted arbitration proceedings against consumers who allegedly owed money to credit card companies. The lawsuit was filed on July 14, 2009—eight days before a subcommittee of the House Committee on Oversight and Government Reform plans to conduct a hearing on the use of arbitration to collect consumer debts.

In reaching a settlement with the Minnesota Attorney General, the NAF agreed to stop all consumer arbitrations, not just ones involving disputed credit card debt. The NAF had administered arbitration proceedings involving other forms of consumer debt, including healthcare, telecommunications, utilities, mortgages, and residential lease agreements.

Millions of arbitration agreements between businesses and consumers have designated the NAF to serve as an arbitration provider. Businesses that are parties to these agreements should consider revising their consumer contracts to designate a different arbitration provider. Such businesses may also find this to be a propitious time to revise their arbitration agreements to make them more likely to withstand the increasingly common attacks on the enforceability of consumer arbitration agreements. 

Learn more about our Consumer Litigation & Class Actions practice.

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Mayer Brown is a global legal services organization comprising legal practices that are separate entities ("Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; and JSM, a Hong Kong partnership, and its associated entities in Asia. The Mayer Brown Practices are known as Mayer Brown JSM in Asia.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

Copyright 2009. Mayer Brown LLP, Mayer Brown International LLP, and/or JSM. All rights reserved.

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