National Arbitration Forum - Controversy

Controversy

Consumer advocacy groups and attorneys frequently claim that the National Arbitration Forum is the most biased against consumers of the major arbitration organizations. Recent studies of the National Arbitration Forum arbitrations demonstrate that in arbitrations between consumers and businesses, 99 percent of the National Arbitration Forum's decisions are in favor of the business. The National Arbitration Forum and its proponents claim that arbitration offers businesses a preferred way to resolve legal disputes without going to court because it offers "efficiency and simplicity". Consumer advocates counter that arbitration is usually imposed by businesses on consumers, employees, and other individuals who have no choice in the matter. Businesses insert contract provisions, known as mandatory binding arbitration clauses, into their contracts. These arbitration clauses prohibit consumers or employees from raising any claim in court. Virtually every American who has a credit card or cell phone, or who builds a house, gets a job, or buys a computer has agreed unknowingly to settle any dispute through binding mandatory arbitration (BMA).

An April 21, 2008 article in the Wall Street Journal delved deeper into the allegations of bias on the part of NAF. More than other arbitration providers, NAF works with "a few large companies, such as credit-card issuers, who potentially have disputes with many consumers," said Jean Sternlight, a law professor at the University of Nevada, Las Vegas who specializes in arbitration. Says Sternlight: An NAF arbitrator "can expect to see many disputes involving the same company, there may be a heightened pressure on the arbitrator to rule in favor of the company or else risk losing future arbitration work". The Journal notes that one California appellate court ruled that an employee whose employer required all employee disputes to go before NAF did not have to arbitrate his discrimination claim. The court said the employer enjoyed a possible "repeat player" advantage, including "knowledge of the arbitrators' temperaments, procedural preferences, styles and the like, and the arbitrators' cultivation of further business".

In its June 16, 2008 cover story, Business Week published an in depth look at credit collection arbitrations at NAF. The story explains how NAF markets itself to collection lawyers and then works with them in ways that raise questions about its impartiality.