WASHINGTON, D.C. — Minnesota Attorney General Lori Swanson brought her fight against unfair consumer debt arbitration to the U.S. Capitol today during testimony before a House Oversight and Government Reform subcommittee.
“The right to have disputes resolved impartially is something that we as Americans value very much,” said Swanson in opening comments during today’s hearing on the misuse of mandatory arbitration to collect consumer debts. “Yet many Americans are giving away that right without even knowing it.”
Swanson filed a lawsuit this month against the National Arbitration Forum (NAF), the country’s main arbitrator of consumer credit disputes, alleging that the organization was not neutral and in fact had significant connections to debt collectors.
In her testimony, Swanson mentioned finding evidence of “backroom hustling” to have mandatory arbitration clauses included in contracts, which then forced consumers to have their disputes resolved by an arbitrator of the creditor’s choice. Swanson also touched on the discovery of marketing materials, which presented a situation skewed in favor of the creditors.
In a settlement reached with the state of Minnesota earlier this week, NAF has agreed to stop administering arbitrations involving consumer debt, including credit cards and consumer loans.
Swanson told the House panel today that she would like to see mandatory arbitration clauses banned.
“I think what Congress ought to do is say, in these situations where consumers have no leverage … [that] mandatory pre-dispute arbitration clauses should not be allowed,” Swanson said.
When asked what this would mean for a consumer who refused to pay a debt, Swanson said that the consumer and the creditor could still choose to go to arbitration or court; it just wouldn’t be a predetermined arrangement.