Herrera’s Suit Against Credit Card Arbitrator Featured in Cover Story of Current BusinessWeek

National publication praised for ‘excellent, exhaustive coverage of a practice that is victimizing too many consumers’

SAN FRANCISCO (June 6, 2008) — City Attorney Dennis Herrera’s consumer protection litigation against the National Arbitration Forum and others is prominently featured in the cover story of the current issue of BusinessWeek magazine, which is available at newsstands and online beginning today. Herrera filed suit against the Minneapolis-based NAF on March 24, detailing in a 27-page complaint a pattern of unfair and unlawful business practices favoring lenders over credit card holders in arbitration proceedings that purported to impartially resolve disputes over consumer debt.

The BusinessWeek cover story published today, entitled “Banks vs. Consumers (Guess Who Wins)” by Robert Berner and Brian Grow, cited key facts from the case, including NAF’s own statistics showing that consumers prevailed in just 30 cases out of more than 18,000 arbitrations that went to a hearing — less than two-tenths of one percent. There was not a single instance in which a credit card company that initiated an arbitration claim against a consumer lost at a hearing, according to Herrera’s complaint.

“The lengths to which NAF has gone to ensure that consumers lose in arbitrations is stunning,” Herrera said. “When arbitration is fair and impartial, it can hold significant benefits in terms of efficiency and access to justice. But the evidence is clear that NAF was anything but fair or impartial. It has functioned as a collection agent masquerading as a neutral party. I’m very grateful to BusinessWeek for its excellent, exhaustive coverage of a practice that is victimizing too many consumers, not just in California but throughout the nation.”

Herrera’s suit alleged that NAF engaged in myriad unethical practices in order to find against consumers in the proceedings, including failing to require debt collectors to prove that the consumer has been made aware of the arbitration; failing to honor consumers’ requests for hearings; and ignoring consumers’ submissions of evidence or arguments throughout the arbitration process. The suit additionally alleged that NAF unlawfully allowed inflated awards to lenders; included inappropriate attorneys’ fees among other arbitration costs and fees; and used attorneys suspended from the practice of law or otherwise ineligible to practice law in California as arbitrators even though NAF advertised that all of its arbitrators were experienced attorneys or judges.

The City Attorney’s case is People of the State of California v. National Arbitration Forum, Inc. et al, San Francisco Superior Court No. 473-569, filed March 24, 2008. The BusinessWeek report is available online at https://www.businessweek.com.