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« National Arbitration Forum ends consumer arbitration business | Main | AAA confirms: No more consumer debt arbitration »

What? AAA stops consumer debt collection arbitration
July 22, 2009 by Ross Runkel at LawMemo

The American Arbitration Association (AAA) announced yesterday that it will stop administering consumer debt collection arbitrations.

The Wall Street Journal quotes an unnamed AAA official as saying that AAA will stop taking these cases "until some standards or safeguards are established."

This announcement comes on the heels of a lawsuit against the National Arbitration Forum (NAF) and a decision by NAF to stop taking similar cases.

Both organizations have recently posted self-laudatory statements on their web sites, praising the fairness and effectiveness of arbitration proceedings between consumers and corporations.

These two organizations are quite different from each other. NAF is a for-profit close-held company. AAA is non-profit of long standing.

My view:

The two organizations seem to have different reasons for their actions. NAF has been hit with law suits, the most recent claiming undisclosed overlaps in ownership between NAF and some of its corporate customers, and it looks like they spend more on defense than they earn on the arbitrations. AAA is now suggesting there is a actually a fairness issue in these cases, citing the need for "some standards or safeguards."

Whatever the reasons, this is a major development. Many phone companies and credit-card issuers insert arbitration clauses in their contracts. So what will happen now?

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