A Credit to BusinessWeek for a damning cover story revealing that the major arbitration firm for credit card disputes heavily favors creditors.

Reporters Robert Berner and Brian Grow explain:

The National Arbitration Forum (NAF), a for-profit company based in Minneapolis, specializes in resolving claims by banks, credit-card companies, and major retailers that contend consumers owe them money. Often without knowing it, individuals agree in the fine print of their credit-card applications to arbitrate any disputes over bills rather than have the cases go to court.

The article goes on to present a strong case for bias on the part of NAF with statistics:

In California, the one state where arbitration results are made public, creditors win 99.8% of the time in NAF cases that are decided by arbitrators on the merits, according to a lawsuit filed by the San Francisco city attorney against NAF.

internal NAF documents:

A September, 2007, NAF PowerPoint presentation aimed at creditors and labeled ‘confidential’ promises ‘marked increase in recovery rates over existing collection methods’…

The September, 2007, marketing presentation, which NAF left with a prospective customer boasts that creditors may request procedural maneuvers that can tilt arbitration in their favor. ‘Stays and dismissals of action requests available without fee when requested by Claimant—allows Claimant to control process and timeline,’ the talking points state.

and current NAF arbitrators:

‘There doesn’t have to be much due diligence put into the complaint. If there is no response [from the debtor], you’re golden. If you get a problematic [debtor], then you can request a stay or dismissal.’ When some creditors fear an arbitrator isn’t sympathetic, they drop the case and refile it, hoping to get one they like better, the arbitrator says.

The piece combines impressive reporting with on-the-mark analysis, right from the opening paragraphs:

What if a judge solicited cases from big corporations by offering them a business-friendly venue in which to pursue consumers who are behind on their bills? What if the judge tried to make this pitch more appealing by teaming up with the corporations’ outside lawyers? And what if the same corporations helped pay the judge’s salary?

It would, of course, amount to a conflict of interest and cast doubt on the fairness of proceedings before the judge.

Yet that’s essentially how one of the country’s largest private arbitration firms operates.

Spirits rise here at The Audit when we come across such an independent-minded—and skillful—piece of reporting.

Elinore Longobardi is a Fellow and staff writer of The Audit, the business-press section of Columbia Journalism Review.