ST. PAUL, Minn. (Legal Newsline) - Minnesota Attorney General Lori Swanson on Tuesday filed a lawsuit against the National Arbitration Forum of Minnesota over allegations the company committed deceptive marketing tactics.
The suit alleges that the National Arbitration Forum informs consumers that it is an impartial entity, all the while convincing credit card companies and lenders to insert arbitrary clause into their contracts and then appoint the Forum to handle the negotiating.
"This is a classic case of the little guy getting stepped on by fine print contracts," Swanson said.
Swanson said credit card companies, banks, cell phone providers and retail lenders often include mandatory predispute arbitration clauses within the fine print of consumer contracts. By signing the agreement, under the arbitration clause, consumers initially waive their right to a court hearing should a dispute occur.
She said the lawsuit targets the companies' bad practice of misleading consumers into thinking it is impartial.
"The company tells consumers, the public, courts, and the government that it is independent and operates like an impartial court system. In fact, it has extensive ties to the collection industry -- ties that it hides from the public," Swanson said.
Swanson went to say the suit alleges that the Forum pays a commission to individuals who can successfully convince a company to include a mandatory arbitration clause in their contracts.
In 2006, the Forum processed around over 214,000 consumer arbitrary claims, of which 125,000 were filed by law firms with direct ties to the Forum.
As a result, the company generated millions in revenue. Swanson said the company has violated the state's consumer fraud act, committed false advertising and initiated deceptive trade practices.