Herrera Hails Pre-Trial Ruling in Consumer Protection Case Against Credit Card Arbitrator

S.F. Superior Court Judge Denies Two Demurrers, Effectively ‘Green-lighting’ City’s Case Against Unfair, Illegal Business Practices

SAN FRANCISCO (July 31, 2008) — City Attorney Dennis Herrera applauded a ruling announced from the bench today by San Francisco Superior Court Judge Peter J. Busch denying two pretrial demurrers and a motion to strike the City’s consumer protection litigation against a credit card arbitrator and lender. Herrera’s litigation against the National Arbitration Forum and FIA Card Services, Inc. earned national attention last month in a BusinessWeek cover story entitled, “Banks vs. Consumers (Guess Who Wins)” by Robert Berner and Brian Grow. The report 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. In not a single instance in which a credit card company initiated an arbitration claim against a consumer did the company lose at a hearing, according to the 27-page complaint Herrera filed on March 24, 2008 against the Minneapolis-based NAF and the Wilmington, Del.-based FIA.

“I am gratified by Judge Busch’s ruling today, which has effectively green-lighted our litigation to halt unfair and illegal business practices that have victimized too many credit card consumers,” Herrera said. “The evidence has been clear that NAF in particular masqueraded as a neutral party while functioning as little more than a collection agent for credit card companies. With the denial of the defendants’ demurrers today, we are assured of getting to the issues that need to be addressed by the trial court.”

Herrera’s office was directed by Judge Busch to prepare the proposed court order denying the demurrers and motion to strike. The City’s lawsuit 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.