San Francisco Sues Provider of Arbitrators, Alleging Bias

[WSJ_law_blog]

The Law Blog tries to avoid starting posts with lots of confusing numbers and other such gobbledy****, but we think this is an interesting stat: From 2003 through March 31, 2007, 18,075 consumers’ arbitrations in California were resolved through hearings conducted by the National Arbitration Forum, according to the NAF’s own data. But only thirty of the matters, or fewer than 0.2%, were won by consumers.

Apparently due in part to that statistic, the NAF, an arbitration organization that helps resolve disputes between credit-card companies and their customers, has been accused of favoring lenders in a lawsuit filed last month by the San Francisco city attorney. (Here’s the WSJ report, from LB colleague Nathan Koppel.) The suit alleges that in specific cases NAF approved an inflated award, improperly imposed attorneys fees and didn’t respond to a consumer’s request to appear at an arbitration, among other things. Also named as defendants in the suit: FIA Card Services NA, a Delaware bank that issues credit cards, and a California debt collector.

“NAF is actually in the business of…churning out arbitration awards in favor of debt collectors,” reads the suit, which is filed on behalf of the “people of California” and seeks $2,500 for each unfair and deceptive act committed.

In a statement, NAF said: “The National Arbitration Forum’s independent case administration and neutral decision makers constitute a system that satisfies or exceeds objective standards of fairness. Our arbitration program has been supported in all courts in which it has been reviewed.”

The allegations in the San Francisco suit give fodder to those plaintiffs lawyers and consumer advocates who argue that consumers are often forced into arbitration without adequately consenting, and that their recoveries can pale in comparison to jury verdicts at trial.