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Highlight Updates The Case of the NAF

While it is an extreme case, the potential for bias among arbitration providers is shown by the case of the National Arbitration Forum (NAF). The Minnesota attorney general brought a complaint in 2009 alleging interlocking ownership involving the NAF and the largest collection firm using the NAF to bring arbitration actions to collect consumer debts.46 The NAF agreed in 2009 to stop handling consumer arbitrations,47 but until that time handled hundreds of thousands of consumer arbitrations with evident bias for the creditor or collector.

In effect, the NAF was in the business of helping creditors avoid class actions and streamline their collection of consumer debts. The NAF advertised that it could help creditors, and advised potential corporate clients that it provides individuals with “little or no discovery” in arbitration.48 NAF arbitrators reported having been blackballed after ruling for consumers,49 and NAF rules and procedures were designed to help the creditor and make class actions impossible. Not surprisingly, creditors specified the NAF as the sole arbitration provider in millions of consumer credit agreements.

A notable study of NAF arbitration was done by Public Citizen and reported in The Arbitration Trap, How Credit Card Companies Ensnare Consumers.50 The report analyzes California data disclosing information on arbitration outcomes in detail. Among the report’s findings are that:

  • ● 99.6% of NAF cases were brought by creditors, not consumers;
  • ● 94.7% of awards were made in favor of businesses;
  • ● In California the top five NAF arbitrators handled on average 1000 cases each and ruled for businesses almost 97% of the time;
  • ● The highest-volume NAF arbitrator issued as many as 68 awards in a single day, in which he awarded every penny the creditor sought in all 68 cases; on his six busiest days, when he issued 332 awards, businesses sought $3,432,919 and he awarded them $3,432,919;
  • ● Arbitrators ruling for consumers are blackballed;
  • ● Excessive fees are charged for a written decision and for other aspects of the arbitration; and
  • ● Consumer attorneys are frustrated by NAF’s failure to follow its own procedures and seeming pro-business bias in case administration.

Further analysis of the same data by the Center for Responsible Lending confirmed NAF’s anti-consumer bias.51 It concluded that companies with more cases before NAF arbitrators get “consistently better results from those same arbitrators” and that “[i]ndividual arbitrators who favor firms over consumers receive more cases in the future.”52


  • 46 {46} Complaint, Swanson v. Nat’l Arbitration Forum, Inc., No. 27-CV-09-18550 (Minn. Dist. Ct. Hennepin Cty. July 14, 2009), available at See also In re Currency Conversion Fee Antitrust Litig., 2006 WL 2685082, at *2 (S.D.N.Y. Sept. 20, 2006), vacated sub nom. Ross v. Bank of Am., 524 F.3d 217 (2d Cir. 2008); Complaint at ¶ 1, People v. Nat’l Arbitration Forum, Inc., No. C6C-08-473569 (Cal. Super. Ct. Aug. 22, 2008), available at; Staff of the Subcomm. on Domestic Policy of the H. Comm. on Oversight & Gov’t Reform, 111th Cong., Arbitration Abuse: An Examination of Claims Files of the National Arbitration Forum (Comm. Print 2009); Arbitration or ‘Arbitrary’: The Misuse of Mandatory Arbitration to Collect Consumer Debts, Hearing Before the Subcomm. on Domestic Policy of the H. Comm. on Oversight & Gov’t Reform, 111th Cong. (July 22, 2009) (statement of Michael Kelly, Chief Executive Officer, National Arbitration Forum and Forthright).

  • 47 {47} Consent Decree, Swanson v. Nat’l Arbitration Forum, Inc., No. 27-CV-09-18550 (Minn. Dist. Ct. Hennepin Cty. July 17, 2009), available at

  • 48 {48} See Exhibits to Plaintiffs’ Brief in McQuillan v. Check ‘N Go (available online as companion material to this treatise).

  • 49 {49} See Deposition of Harvard Law Professor Elizabeth Bartholet (Sept. 26, 2006) (available online as companion material to this treatise) (after Prof. Bartholet ruled against a credit card company, she was removed from hearing other cases involving that company; NAF sent out letters to the consumers falsely stating that she would no longer be the arbitrator in their cases, because she had a “scheduling conflict”); Richard Neely, Arbitration and the Godless Bloodsuckers, The W. Va. Law. 12 (Sept/Oct. 2006) (when former West Virginia Supreme Court of Appeals justice did not award bank the full amount of attorney fees it asked for, he was barred from handling any more cases involving that bank; banks, as “professional litigants,” can make use of their superior knowledge of arbitrators’ past decisions to help ensure that their cases are heard by NAF arbitrators who will rule in their favor). See also Robert Berner & Brian Grow, Banks v. Consumers (Guess Who Wins), Bus. Wk., June 5, 2008.

  • 50 {50} Public Citizen, The Arbitration Trap, How Credit Card Companies Ensnare Consumers, available at (also available online as companion material to this treatise).

  • 51 {51} Joshua M. Frank, Ctr. for Responsible Lending, Stacked Deck: A Statistical Analysis of Forced Arbitration (2009), available at

  • 52 {52} Id.