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Lori Swanson, Minnesota's Attorney General, filed a consumer fraud suit against the National Arbitration Forum in July, alleging that the firm worked closely with creditors and debt collectors behind the scenes, against the interests of consumers while claiming to be a neutral forum.
Five days later, she secured a consent decree in which the NAF, without admitting blame, agreed to cease its credit card arbitration business. Within days, the American Arbitration Association announced that it too would stop its involvement in consumer debt collection arbitration until it could develop standards of practice.
In the consumer law world, it was a shocker.
Consumer attorneys hailed Swanson's work as the finest piece of lawyering in consumer practice in years, leveraging the state's subpoena power to uncover a one-sided system that private attorneys suspected all along.
As a result of these events, Congress started hearings the same week.
Swanson, elected in 2006 and the first woman to hold her office, testified before a Congressional subcommittee that her investigation found that debt collection claims were routinely steered to arbitrators who regularly ruled in favor of the debt collectors.
"There is a tremendous pressure on arbitration companies" to rule in favor of creditors, she testified. "Companies know that if an arbitration company isn't friendly to corporate litigants, they'll take their business elsewhere."
Thanks to Swanson, the pressure will be eased for hundreds of thousands of consumers.