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NAF enters into consent decree with Minnesota AG following claims of consumer fraud

Last week, we told you about a lawsuit filed by Minnesota’s attorney general against the nation’s largest arbitration company. The suit, filed July 14, 2009, in Hennepin County District Court by Attorney General Lori Swanson against the National Arbitration Forum (NAF) of Minnesota, alleged “consumer fraud, deceptive trade practices, and false advertising.”

The lawsuit alleged that NAF has extensive ties to the collection agency, despite presenting itself as an independent and impartial arbitrator. The lawsuit says NAF actually works in conjunction with creditors to convince them to place mandatory binding arbitration agreements, and then to appoint NAF as the arbitrator of any future disputes.

On July 19, Swanson announced that the NAF had agreed it would no longer arbitrate any cases between consumers and businesses. The consent decree, entered into between the NAF and the Minnesota Attorney General, forbids the NAF from administering, processing, or “[i]n any manner participating” in any new consumer arbitrations on or after July 24. In exchange, the Minnesota Attorney General has agreed to dismiss her lawsuit.

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