Last week the Minnesota attorney general Lori Swanson, filed a lawsuit against the National Arbitration Forum, the largest arbitration company in the country for consumer credit disputes, alleged that the agency deceived consumers into thinking it was a neutral arbitrator for debt collection matters, when in fact it was working FOR the creditors.
Swanson said that credit card companies, banks, retail lenders, and cell phone companies increasingly place, in the fine print of their consumer agreements, mandatory predispute arbitration clauses.
Through those mandatory arbitration clauses, consumers waive, in advance, their right to have their day in court if a dispute arises and agree to have a single company act the sole provider for arbitration services and that single company is more often that not the National Arbitration Forum.
The National Arbitration Forum
If that name sounds familiar to you domainers, its because guess who decides URDP cases; right
The National Arbitration Forum.
So today, just a week after filing the suit, the Attorney General office announced that they had reached a settlement with the Forum.
While the specific terms of the settlement were not disclosed, the Forum agreed to stop arbitrating consumer credit disputes all together. Under the settlement, the company has a week to stop consumer arbitration matters, but can continue servicing Internet domain name disputes, personal injury claims, and other cases.
Guess who owns the National Arbitration Forum, a New York hedge fund that also operates a debt-collection agency. You eyes are not deceiving you. The arbitrator of debt collection claims, is owned by the debt collectors.
Now first let’s read the allegations that the Attorney General made last week against the Forum and then I will have comments:
“””The Attorney General’s suit alleges that the National Arbitration Forum represented to consumers and the public that it is independent and neutral, operates like an impartial court system, and is not affiliated with and does not take sides between the parties.
“The company tells consumers, the public, courts, and the government that it is independent and operates like an impartial court system. In fact, it has extensive ties to the collection industry—ties that it hides from the public,” said Attorney General Swanson.
The lawsuit alleges that the National Arbitration Forum, while holding itself out as impartial, works behind the scenes—alongside creditors and against the interests of ordinary consumers—to convince credit card companies and other creditors to insert arbitration provisions in their customer agreements and then appointing the Forum to decide the disputes. The lawsuit alleges that the Forum pays commissions to executives whose job it is to convince creditors to put mandatory arbitration clauses in their customer agreements. The suit alleges that the Forum does this to generate arbitration filings in the Forum—and hence, revenue—for itself.
The lawsuit alleges that, despite telling consumers and the public that it is not affiliated or aligned with the collection industry, the Forum in fact has financial ties to the collection industry. The lawsuit alleges that, beginning in 2006 and through 2007, Accretive—a family of New York private equity funds—engineered two transactions. In the first transaction, Accretive formed several equity funds under the name “Agora” (meaning “Forum” in Greek), which invested $42 million in the Forum.
In the second transaction, three of the country’s largest debt collection law firms—Mann Bracken of Georgia, Wolpoff & Abramson of Maryland, and Eskanos & Adler of California—merged into one large national law firm called Mann Bracken.
Accretive then acquired the majority interest in a debt collection agency called Axiant, which acquired the collections operations of Mann Bracken. Through these transactions, Accretive took control of one of the country’s largest debt collection enterprises and became affiliated with the Forum, the country’s largest consumer collection arbitration company. The lawsuit alleges that Accretive principals remain actively involved with the Forum.
The lawsuit states that, in 2006, the Forum processed just over 214,000 consumer collection arbitration claims, of which 125,000, or nearly 60 percent, were filed by the above law firms.
Swanson said that the Forum was aware of the affiliation problem in 2006 when it negotiated its relationship with Accretive. She pointed to an email from an officer of the Forum to the hedge fund stating: “…we should certainly plan for unwinding any deal in the event shared ownership becomes an acute issue.”
Swanson was joined at the announcement of the suit by Richard Neely, retired Chief Justice of the West Virginia Supreme Court of Appeals. Upon retirement, Justice Neely was appointed as an arbitrator by the Forum but stopped receiving cases after he refused to award attorneys’ fees to creditors that he did not believe were allowed under West Virginia law. Neely praised Swanson’s lawsuit, saying, “I am happy that a government official has stepped in to try and address this problem. This company tilts the playing field toward creditors and makes a mockery of our legal system,” he said.””
Ok so much for the allegations of the Attorney General.
Now for my thoughts.
This is the outfit that ICANN has contracted with to handle domain disputes filed through UDRP’s
Of course in settling the case the Forum admitted no guilt.
However giving up handling credit disputes forever, just one week after the suit was filed tells me all I need to hear.
The question is if this outfit is not fit to hear disputes between consumers and debt collectors, how come we get stuck with them to decide issues involving our valuable domain assets?
If they represented themselves to the public as being a fair and uninterested party to settle disputes, only to find that they are owned by one side of the dispute, I think they should be immediately disqualified from hearing another domain dispute.
I think ICANN should immediately halt any and all pending UDRP’s in front of the Forum.
I think ICANN should immediately begin the process of finding a new company to replace the NAF to handle UDRP disputes.
I think having read the allegations of the Attorney General, that every decision made by the Forum pursuant to a UDRP in which a domain was ordered transferred be immediately made appeal-able to the new company that ICANN selects to hear NAF’s caseload of UDRP’s in the future.
Read the allegations, read the settlement and then you tell me how can this company be trusted to fairly and unbiasedly decide the fate of your property.
What was that story about the fox and chickens ? I sort of recall something…
Spot on MHB. Is this something the ICA could get involved with?
JP
Already wrote them
I want my money back for the bogus UDRP brought against me for my generic domain…….even though I won.
My case should have never passed the initial NAF review process to determine if it was eligible for a UDRP.
Now, I want my “thousands” back they took from me just so they could make UDRP commissions.
What a bunch of crooks…….I always knew something was fishy with them.
Johnny
Can you say “class action”
@Johnny – Can you explain why they should have refused to hear the complaint? Did they not follow the rules for submitting a complaint?
@ UDRPtalk….. They gave the green light for a UDRP case against me over a generic domain I had owned since 1996 when the TM was given to the complainant in 2007 for the one word generic domain.
I did not “register the domain in bad faith”…..that alone should have been enough to quash this case and not let it proceed to UDRP arbitration. Any simple, fast summary review of the filing should have been enough to disallow the case.
BTW……they allowed the case to filed against me in December….right before Christmas. I was out of the country in a tropical jungle for three weeks with no computer, phone, or other means of communication. I arrived home at 3:00 AM, after a grueling 42 hour return trip in multiple airports and planes to find the NAF’s UDRP package sitting on my office desk. I only had a week to respond at that point. It was a dirty trick that almost worked.
Domain owners should always pay attention around holidays for UDRPs and the like. The lawyers also like to send communications on Fridays to try to ruin your weekend. It’s all about psyching you out and is just a silly scare tactic.
Yeah, I guess you could say I hate the NAF and their minions, who are the trademark groups and their tight-knit lawyer friends, most of which come from Texas ! 🙂
Will the NAF be arbitrating the URS?
@Johnny – The UDRP rules don’t allow for a “quash” process because NAF/WIPO administrators are just clerks who will allow a case to proceed as long as there isn’t an obvious deficiency. “Genericness” is not one of those factors. I wish it was, though. I feel your pain.
@Johnny – The UDRP rules don’t allow for a “quash” process because NAF/WIPO administrators are just clerks who will allow a case to proceed as long as there isn’t an obvious deficiency. “Genericness” is not one of those factors. I wish it was, though. I feel your pain.
P.S. – Sorry, forgot to tell you great post!
@Johnny – Very good post and the majority of people would feel exactly as you do.
Think about how many businesses put their trust in the NAF whom they assumed were an impartial, neutral body deciding their fate. Does this not constitute some form of fraud on the public when they promote themselves as impartial arbiters and in fact they are not?
And to MHB: interesting suggestion about ICANN halting all cases brought before the NAF. Of course I am now so jaded against disingenuous ICANN, I expect they won’t move on this unless it directly serves them financially. They are nearly incapable of embracing anything on principle alone unless it directly profits their organization.
Chris
Since the URS is still a “proposal” at this point, the company who will handle these has not been determined
Hey Michael,
Thanks for bringing this to the public’s attention. I guess my question was rhetorical; with the URS handing more power to corporations, and cases to be arbitrated by an entity that can clearly be bought for the right price, it’s practically criminal. How long are we going to tolerate ICANN’s corrupt junket-monkeys and their equally dodgy buddies at the NAF?
Clearly the dollars have corrupted the people in power and it’s high time they were made accountable. As domain owners, what are we going to do about it, or are we all going to fiddle while Rome burns like we usually do?
We pay these bastard’s salaries. Let’s take them out of the equation once and for all; make ICANN transparent and representative of the people it derives it’s money from.
Great reporting and comments, too. Thanks.
How about people writing a simple letter to their state’s attorney general asking the same question as your headline? With 50 letters there may be just one state attorney general willing to take the issue on. The letter is just as easy as writing a comment here, but drives more gears.
J-
Good idea, but not sure anyone AG is going to get too excited about a bunch of domainers getting screwed.
I think the better shot is to write to ICANN and get them to take away The NAF accreditation to server as an arbitrator.
Maybe, but these (a) are not mutually exclusive actions and (b) ICANN is less responsive than states’ attorney generals. (ICANN makes money from NAF, like many past sound arguments to ICANN, they will ignore the issue because they have the power to do so.)
If phrased well, the letters to the states’ AGs could emphasize the revenues to the states (via state income taxes) could be at stake. Besides, the Min AG took the issue on for more than economic motives–it appears they did so for basic justice and consumer transparency reasons too.
J-
No problem
Go get em
Ms. Swanson is not your knight in shining armor, and she won’t care about domainers because it won’t get her any good press. First, the Minnesota AG’s office has been ignoring consumer complaints about NAF for the last 7 years. Swanson only files suits when other states have already done so, and is confident that she can make a huge splash in the press before immediately settling the suit. Second, Swanson is a bad apple. She busted a union in her office, and a legislative auditor’s investigation into her office confirmed that she ordered attorneys to falsify affidavits, file meritless suits to generate good press, etc. Swanson is a democratic version of Sarah Palin. Until protecting domainers will get her some good press, she’s not going to care at all.
Mpls
I never thought Ms. Swanson or any other AG is going to do anything for domainers.
However, for us, the NAF is the issue here, not Ms. Swanson.
The NAF is making decisions on the ownership our property after settling for this case a week after suit was filed.
The charges bought and not fought by the NAF go to the heart of their ability to render fair, impartial decisions.