Arbitration and the Godless Bloodsuckers

We have often written about problems with mandatory arbitration, but even we were shocked by the allegations made by Richard Neely, a former justice of the West Virginia Supreme Court, about the National Arbitration Forum, one organization that provides arbitrators for commercial disputes, in his article, Arbitration and the Godless Bloodsuckers.  Neely describes his solicitation to be an NAF arbitrator after he was no longer on the bench. Once he was assigned two cases, he discovered how insidious the process could be. For example, the arbitration company sent him a judgment form already filled out so that all he had to do was check the appropriate box for the credit card company to win and then sign his name. Not surprising, after he failed to award the credit card company all that they sought in the arbitration, he never received another case from NAF.

Neely is not the only person to criticize NAF. The Trial Lawyers for Public Justice have filed motions to strike the NAF from serving as arbitrators, citing things like NAF advertisements promising to reduce corporate customers’ bottom lines if they choose the NAF to arbitrate their disputes and close ties between NAF and various corporate entities that routinely use the NAF.

This type of information should be a wake-up call for consumers. Too often, consumers blindly agree to arbitration agreements without thinking.  Instead, consumers need to really read the agreements they enter into to look not only for mandatory arbitraiton clauses, but other issues as well.

If consumers do agree to mandatory arbitration agreements, they need to pay attention once disputes arise.  Too often, consumers get notice of an arbitration (and even lawsuits) and fail to respond.  The result is a default judgment entered against the consumer for the complete amount of the debt, and often additional fees.  Because arbitration awards are extremely difficult to overturn, consumers lose their rights to put their best foot forward on their claims.

We once again emphasize that not all arbitrations are bad. We routinely recommend voluntary arbitration when it fits the situation. But mandatory arbitration agreements present many dangers to consumers.