Consumer Law

Practical Effects of NAF?s Exit From Arbitration

By Randall Ryder

National Arbitration Forum’s recent withdrawal from consumer arbitrations has cast a dark shadow on the use of arbitration as an alternative dispute resolution process and created ripples throughout the system.

For example, Bank of America has dropped its arbitration requirement for all consumer transactions. Undoubtedly, this was a reactionary move to NAF’s withdrawal—Bank of America realized that when one of the largest arbitration providers in the country gets sued for bias, something is amiss.

Consumers now have a potent defense to attempted confirmation of NAF awards. When creditors seek to enforce the arbitration awards in court, consumers can defend on the grounds that the system was inherently biased. This does not mean the awards will be thrown out, but directing the court to either the Minnesota Attorney General’s complaint or the consent order is powerful evidence.

Current arbitration clauses that give exclusive arbitration jurisdiction to NAF are likely unenforceable. Since most arbitration clauses specifically mention NAF, they cannot be enforced now that NAF is out of the game.

Practical Implications of NAF Withdrawal from Arbitrations | Consumer law and policy blog

(photo: ~~Tone~~)

Full post as published by Caveat Emptor on September 09, 2009 (boomark / email).