Here are just a few of the troubling facts: • NAF appears to funnel a very large number of cases to a few carefully picked arbitrators who nearly always rule for lenders. For example, one NAF arbitrator in California has decided more than 500 cases where MBNA bank sued customers, ruling for the bank in all but a handful of cases. Many NAF arbitrators decide as many as 40 cases in a day.
• In 1998, First USA Bank gave sworn interrogatory answers in an Alabama case where consumers challenged an arbitration clause. The answers showed that while the bank had sued its customers more than 50,000 times in arbitration, only four customers had brought cases against the com- pany in arbitration! Out of almost 20,000 completed arbitrations, the bank won all but 87, for a win/loss rate of 99.6%.13
• Instead of filing normal complaints with supporting documents to start a case, certain debt collectors file claims with the NAF in the form of purely digital data streams. The NAF then takes it upon itself to format this data into documents with figures that are sent to the NAF arbitrators with pre-printed orders. The figures are supported by digital signatures of the debt collectors’ attorneys. The arbitrators are not sent any original documents establishing that the con- sumers actually agreed to either the arbitration clauses or the credit con- tracts, but simply receive forms with a blanket assertion from the lenders that all consumers agreed to arbitra- tion and owed the asserted amounts listed for the accounts.
• In the overwhelming majority of cases, NAF arbitrators simply sign the pre-printed orders generated by the NAF home office that award the lender the full sums that the lender
13
Please contact me if you’d like a copy of these interrogatory answers. Phone: 202- 797-8600, Email: pbland@publicjustice. net.
42
has requested for the loans, any fees related to the loans, attorneys’ fees and arbitration fees.
• A large number of cases have been documented establishing that the NAF has entered awards in favor of MBNA and other lenders against per- sons who were identity theft victims who did not, in fact, owe any debts.14
• A number of consumer lawyers and unrepresented consumers have alleged to the author that there are many cases where NAF arbitrators have awarded sums to lenders for debts that were past the relevant statute of limitations. A review of the documents in several of these cases supports the allega- tions.
• A substantial body of anecdotal expe- rience from consumers and consumer lawyers across the U.S. indicates that NAF rarely, if ever, grants any kinds of extensions to consumer debtors and regularly enters default awards against consumers who were as little as one day late in responding to arbitration notices. By contrast, numerous consumers and consumer attorneys report that NAF regularly grants extensions to its lender clients, particularly MBNA Bank, when the
14
Please contact me if you would like to see written descriptions of a number of these cases that were prepared by attorneys or investigators with whom Public Justice regularly works, and particularly persons at Public Citizen.
15
See, e.g., CACV v. Corda, 2005 WL 3664087 (Conn. Super. Dec. 16, 2005) (denying CACV’s motion to confirm NAF award for lack of evidence, and noting that NAF rules provide “no procedure by which the arbitrator makes any determination of whether the defendant has received actual notice of the demand for arbitration. . . . and if the defendant does not respond in writing to the demand for arbitra- tion, NAF simply decides the case ‘on the papers.’ This certainly results in a high likelihood that the outcome of the arbi- tration will be in the plaintiff ’s favor.”); MBNA v. Barben, 111 P.3d 663 (Kan. Ct. App. 2005) (affirming trial court’s vacatur of NAF award, and noting trial court’s finding that delivery date on face of NAF award was “patently . . . shown to be un- true” given that neither NAF’s Director of Arbitration nor the alleged debtor were
Trial Reporter
lenders request extensions or miss deadlines. A growing number of courts have
rejected these cookie-cutter arbitration awards for debt collectors in recent cases,15
but many consumer advocates
are concerned that the NAF system is geared towards quickly awarding lend- ers the full amount the lenders claim a consumer owes, without performing much scrutiny of the magnitude or ap- propriateness of these awards.
Legislation Public Justice does not lobby, nor
endorse or oppose any legislation. As a
present on the date on which the award was purportedly delivered by the Director to the debtor); MBNA v. Credit, 132 P.3d 898 (Kan. 2006) (affirming vacatur of arbi- tration award issued by NAF where MBNA failed to provide sufficient evidence that alleged debtor had agreed to arbitrate or that NAF had served award on alleged debtor, also “not[ing] that these Kansas cases appear to reflect a national trend in which consumers are questioning MBNA and whether arbitration agreements exist. Given MBNA’s casual approach to this liti- gation, we are not surprised that the trend may be growing.”); MBNA v. Engen, 128 Wash. App. 1050, 2005 WL 1754169 (Ct. App. July 25, 2005) (reversing award that NAF arbitrator had entered against con- sumer who had never used MBNA card after receiving arbitration clause, and thus who had never become bound by arbitra- tion clause); MBNA v. Nelson, 15 Misc.3d 1148(A), 2007 WL 1704618 (Table) (N.Y. Civ. Ct. May 24, 2007) (refusing to “rubber stamp” MBNA’s motion to confirm NAF award where MBNA had failed to provide any evidence connecting the generic agree- ments it submitted to the specific alleged cardholder, and noting that “[i]t is almost never apparent, from the filings, what type of process was effectuated on the debtor to notify them of the arbitration proceedings, whether the debtor participated at all in the underlying arbitration, what evidence, if any, the arbitrator considered, what claims the arbitrator ruled upon, and what figures the arbitrator used in calculating each award.”); MBNA v. Pacheco, 824 N.Y.S.2d 769 (N.Y. City Ct. Aug. 11, 2006) (denying MBNA’s motion to confirm arbitration award that NAF had entered against alleged debtor despite fact that she had never been served with the notice of arbitration).
Fall 2007
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