California Credit Law Blog

The American Arbitration Association has announced it was dropping its arbitration program for consumer debts. This comes only a few days after the National Arbitration Forum announced it was dropping its consumer debt arbitration program. Most of the cases involved credit card and cell phone debts.

This is great news for consumers who could not get a fair hearing at AAA or NAF. Both had rigged their procedures in favor of the banks and corporations that paid their fees. Consumers lost 94% of the 214,000 cases processed by NAF in 2006.

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Posted In: Debt Collection

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The Minnesota Attorney General sued the National Arbitration Forum alleging it was essentially a front for various large banks and collection agencies. NAF falsely held itself it out to be a neutral forum for processing creditors' claims against consumers.

On July 19, 2009, the AG announced that NAF has entered into a settlement of the lawsuit under which NAF will immediately stop accepting consumer arbitrations of any sort. This is wonderful news for consumers and a major step towards getting rid of all mandatory arbitration clauses in consumer contracts.

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Posted In: Credit Cards

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Today, the Minnesota Attorney General sued the National Arbitration Forum, the major arbitration firm that banks use to prosecute consumers who owe credit-card debt. The AG's complaint states that NAF represents to the public, the courts, and consumers that it is independent, operates like an impartial court system, and is not affiliated with any party.

However, what the consumer does not know is that NAF works alongside creditors behind the scenes against the interest of consumers. The truth is that NAF is actually controlled by major collection law firms that represent credit-card companies. A New York hedge fund known as Accretive LLC has cross ownership of major collection law firms and the NAF sending collection cases between the two.

Consumer advocates have long known that NAF has created a a system whereby its arbitrators (lawyers and judges hired on a contract basis) have powerful incentives to rule in the creditor's favor. For example, if a retained arbitrator begins to rule against the credit card companies, NAF drops him or her as an arbitrator.

Continue reading "Minnesota Atty General Suit Alleges the National Arbitration Forum Is Fraudulent" »

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A few days ago, the White House sent Congress a bill to create a Consumer Financial Protection Agency (CFPA). Everyone who favors consumer protection should support this bill. Georgetown University Law School Professor Adam Levitin argued the case for the creation of the CFPA in the "Credit Slips" blog that covers credit and bankruptcy. He states we need the CFPA because the current regulatory structure doesn’t work and it will almost inevitably cause future crises, if not of the scale of the current one, then still too serious to countenance.

Prof Levitin points out that the economic disaster of 2008 is the chief exhibit in showing that the current system doesn't work. There were many factors behind the economic disaster, but bad consumer credit products were an important factor. A major lesson from this crisis is that consumer debt can affect global economic stability (no surprise as consumer spending is something like 70% of GDP).
(Continued below)

Continue reading "Obama's Proposed Consumer Financial Protection Agency " »

Posted by Mark F. Anderson | Permalink | Email This Post

Posted In: Legislation

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