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Banks versus Consumers – who wins?

Front Page of Business Week today: Banks versus Consumers – who wins?

The focus is upon credit cards and debt collections and, with American credit-card debt hitting a record high of $957 billion in Q1 2008, up 8% from the previous year, according to Federal Reserve data, this is a growing market.   One of the market leaders in debt collections is the National Arbitration Forum (NAF), used by many banks to chase up
delinquent accounts.

The article then goes into a few statistics:

  • NAF handled 33,933 collection arbitrations in California, from January 2003
    through March, 2007; of the 18,075 that weren’t dropped by creditors, otherwise dismissed, or
    settled, consumers won just 30, or 0.002%, of these cases; 
  • NAF employs 1,700 freelance arbitrators – mostly moonlighting lawyers and
    retired judges – who handle some 200,000 cases a year, most of them concerning
    consumer debt; and
  • NAF’s presentation to clients tells them that, in cases in which an award or
    order is granted, 93.7% are decided without consumers ever responding and that
    only 0.3% of consumers ask for a hearing (the rest just tussle through the
    debate via mail).

As a result NAF is becoming the target of a legal action with
consumers claiming that rather than arbitrating, they are purely acting on
behalf of banks. For example, 1,400 Virginia residents claimed that they had
been promised, in writing, that they could appear at hearings before an NAF
arbitrator but that the law firm representing NAF, Wolpoff & Abramson,
failed to arrange the hearings. The case was settled in favour of the
residents.

Interesting article.

About Chris M Skinner

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here…

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