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. 

For more information about the issues raised in this Client Alert, please contact the authors, Evan Tager, Archis Parasharami or Kevin Ranlett.

Learn more about our Consumer Litigation & Class Actions practice.