Scandalous and shocking allegations of MN AG's lawsuit

The lawsuit recently filed by the Minnesota Attorney General (AG) makes shocking allegations against the NAF, a national and international administrator of alternative dispute resolution (ADR) services that include mediation and arbitration. Although the NAF is supposedly impartial, the lawsuit alleges that it:

• Assists creditors, not debtors. Although the NAF maintains that it is not affiliated with any party, the lawsuit alleges that, “The consumer does not know that the Forum works alongside creditors behind the scenes—against the interests of consumers—to convince creditors to place mandatory pre-dispute arbitration clauses in their customer agreements and to appoint the [NAF] as the arbitrator of any disputes that may arise in the future.” It says that the NAF does this to generate revenue for itself.
• Affiliates with NY hedge funds & collection agencies. The lawsuit further alleges that the NAF is, “...financially affiliated with a New York hedge fund group that owns one of the country’s major debt collection enterprises,” which “...invested $42 million in the [NAF] and obtained governance rights in it.” It also states that the NAF, “...conceals its affiliations with the collections industry through extensive affirmative representations, material omissions and layers of complex and opaque corporate structuring.”
• Advises creditor behind the scenes. Again, although the NAF states that it does not have any relationship with any party and does not counsel its users, the lawsuit alleges that it, ...works closely with creditors behind the scenes to: (1) encourage them to file arbitration claims as an alternative way to collect debt from consumers; (2) draft arbitration clauses, advise creditors on arbitration legal trends, and in some cases, help them draft claims to be filed against consumers; and (3) refer them to debt collection law firms, which then file arbitration claims against consumers in the Forum.”

Damaging evidence

Some of the most damaging evidence against the NAF concerns its correspondence which attempts to solicit business from creditors. Examples listed in the complaint include the following statements made by the NAF:

• “[T]he customer does not know what to expect from Arbitration and is more willing to pay...”
• Consumers “ask you to explain what arbitration is then basically hand you the money...”
• “[Y]ou [the creditor] have all the leverage [in arbitration] and the customer really has no choice but to take care of the account.”