Issue: Fraud and conspiracy

National Arbitration Forum Consumer Fraud Lawsuit

Lieff Cabraser represents consumers in a class action lawsuit against the National Arbitration Forum (“NAF”), and several entities related to NAF. The suit alleges that the defendants conspired to conduct sham consumer debt arbitrations that harmed consumers.

NAF Lawsuit Plaintiffs’ Allegations

As the largest consumer credit arbitration company in the nation, the NAF holds itself out to the public, courts and consumers as a neutral third party arbitration service. The NAF claims it is independent of the debt collection agencies and creditors that use its services.

In fact, as alleged in the complaint against the NAF and the other defendants, the NAF is closely tied to the credit and debt collections industries. As a result, consumers whose cases are arbitrated through the NAF are placed at a significant disadvantage. Specific allegations against the NAF include:

• The NAF has conspired with several major creditors to mandate binding arbitration clauses in the term and condition of sale in standard consumer debt agreements such as credit cards, consumer loans, utilities, telecommunications, health care and consumer leases. This conspiracy eliminates consumer access to the court system.
• The NAF conceals its link to the credit agencies through extensive affirmative representations, material omission and complex and opaque corporate structuring.
• The NAF conducts sham arbitrations which virtually always result in a favorable ruling for the banks and credit card companies that utilize NAF’s services.
• The NAF and co-defendants have profited unfairly from this biased process.

Case Update

On February 22, 2010, U.S. District Court Judge Paul A. Magnuson denied in large part motions to dismiss the class action lawsuit filed by consumers against the NAF and several entities that own NAF, alleging fraud and racketeering activity. The plaintiffs, consumers whose debt disputes were submitted to binding arbitration before the NAF, allege NAF conducted sham arbitrations that resulted in rulings in favor of creditors.