The headline above is a quote from former West Virginia Supreme Court Justice Richard Neely, describing what his role was as an arbitrator at the National Arbitration Forum (NAF), a for-profit company hired to enforce mandatory arbitration clauses for credit card consumer loans. "NAF is nothing more than an arm of the collection industry hiding behind a veneer of impartiality," says Richard Neely.

To echo Elizabeth Warren's post, the devastating expose by BusinessWeek on mandatory arbitration has stories by Neely and other former arbitrators who describe from the inside an arbitration system stacked completely against consumers-- a system where creditors win 99.8% of all disputes involving companies ranging from Bank of America to Sears to Citgroup. Arbitration clauses buried in the fine print of credit card offers means consumers lose the right to have disputes decided in an independent court and instead are forced into corporation-selected arbitration firms.

Elizabeth Bartholet, a Harvard Law School professor and an NAF arbitrator in 2003 and 2004 stated in a deposition that NAF ran "an unfair, biased process." Dennis J. Herrera, San Francisco's city attorney, has sued the firm in California state court: "NAF has done an end run around the law to strip consumers of their right to a fair collection process," Herrera said in an interview with BusinessWeek. And made a healthy profit doing so-- in 2006, NAF had a net income of $10 million, a 26% profit margin on revenue of $39 million.

What's shocking is that it's not just critics who describe arbitration as a way for industry to gain at the expense of consumers-- it's actually NAF's pitch to corporate clients. A confidiential September, 2007 NAF presentation aimed at creditors promised "marked increase in recovery rates over existing collection methods" and celebrated the fact that 93.7% of arbitrations are decided without consumers even getting to participate in the process. And if a consumer does respond and files a response, NAF promoted the fact that creditors can use delays and dismissals to manipulate arbitration cases.

As Progressive States Network described in a Dispatch in March, the use of mandatory arbitration clauses are increasingly being used by large corporations to deny consumers and employees any access to justice in the courts. While arbitration is often sold publicly as a "more efficient" and less costly alternative to court trials, a recent report by Public Citizen, The Costs of Arbitration, found that arbitration is almost always more expensive than the cost of bringing a lawsuit in traditional court. In fact, because it uses costly private arbitrators, the overall costs of arbitration can be up to five thousand percent higher than in court litigation for individuals. And because many arbitration agreements prohibit collective actions, consumers and employees can't cut their costs by combining their efforts into a combined lawsuit.

A once obscure 1925 federal law, the Federal Arbitration Act, overrides both federal and state legal rights and, in the words of the employee rights advocate, Workplace Fairness, creates "a process that can include excessive filing fees and arbitration costs, limits on the discovery necessary to build a case" and other ways to limits the ability of employees or consumers harmed by a company to get justice.

However, while federal law makes it hard for states to ban mandatory arbitration altogether, they do have the power to stop the kind of the abuses of arbitration that companies like NAF promote. There are a series of key model state laws states can enact to preserve consumer rights, force arbitration companies to disclose the results of arbitration decisions, and limit any fees imposed on consumers by the process

The kinds of abuses outlined in the BusinessWeek expose should be a rallying cry for reform of arbitration in every statehouse-- and shows the need at the federal level to repeal the sections of the Federal Arbitration Act that block states' ability to protect consumer and employee rights.