photo by xenia antunes
Last week one of the nation’s largest arbitration service providers agreed to exit the business of consumer arbitration altogether in order to settle a court case brought against it by the Minnesota attorney general’s office.
The National Arbitration Forum had presented itself to consumers in debt disputes with creditors as an independent organization that served as an impartial mediating alternative to the court system. Alternative dispute resolution is important because, among other things, it helps keep the court system from getting clogged with cases that can just as easily be resolved elsewhere.
Turns out the NAF was hiding some pretty serious ties to the collection industry. Minnesota Attorney General Lori Swanson claimed that the organization actively worked with creditors against the interests of consumers. Evidence included the fact that NAF is owned by a New York hedge fund that also operates a debt-collection agency.
You won’t find any mention of that fact on their web site, of course. What you will see are the words expertise, innovation and integrity prominently displayed. No doubt NAF is expert, but there’s nothing innovative in hiding the fact that you’re not a neutral, impartial party. And integrity seems to be sorely lacking.
CEO Mike Kelly’s statement on NAF’s exit from a huge piece of business (200,000 proceedings a year) attributes the decision to legal costs, the current economic climate, “legislative uncertainty” surrounding arbitration, pretty much everything except “We got caught misleading people and it would’ve cost us big bucks when we lost the case.”
The communication lesson here is simple. Sometimes it’s what you don’t communicate that gets you in the biggest trouble. A simple test of whether your lack of transparency might bite you is to ask yourself one question: “What would happen if this became public knowledge?”
NAR found out … they lost a valuable piece of their business. Guess they couldn’t convince the attorney general to take it to dispute resolution.
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