"I said to myself, 'didn't I hear something like this a few months ago?' I had something from the state of California on my mind," said Carlson, who used to serve as one of Swanson's deputies.
San Francisco California, that is. Swanson's suit, filed on July 14 and settled a mere three days later, was a near facsimile of a suit filed in San Francisco a year ago by City Attorney Dennis Herrera. His deputies and investigators had turned up ways in which the deck is fraudulently stacked against consumers when they sign credit card contracts agreeing to settle any disputes via arbitration, rather than going to court. San Francisco investigators found that only a minuscule percentage of consumers ended up prevailing in credit card company-mandated arbitrations.
And yet Swanson -- not Herrera -- was feted as a hero by Washington D.C. Democrats earlier this week, after pressuring the NAF -- the kingpin of credit card arbitration firms -- into withdrawing from the business of settling disputes between consumers and credit card companies. Another large arbiter, the American Arbitration Association, quickly followed suit.
A Swanson spokeswoman said her office would not be able to comment on the NAF case until tomorrow. Credit card industry officials have long said that arbitration saves consumers and companies time and money -- and that when consumers lose (as they invariably do) it's because evidence shows they actually owe the money claimed by companies.
The Minnesota and San Francisco complaints said arbitration proceedings were systematically rigged in credit firms' favor, resulting in anti-consumer resolutions 95 percent of the time. Consumer advocates have long cried foul that mandatory arbitration has been quietly slipped into the fine print of millions of credit card, cell phone, and other consumer contracts, causing consumers to unknowingly sign away their rights.
Stories in the Wall Street Journal, Business Week and thousands of other outlets credited Swanson's office with blowing open the consumer credit business, whose profits had been based on changing the ground rules on consumers, then charging steep fines to violators, without fear of being dragged into court.
The problem is, Swanson's not the one deserving lion's share of the credit for taking on the big arbitration organizations. By settling their suit just three days after filing, Minnesota officials may have not have extracted as many concessions as they might have.
"This settlement affects NAF arbitrations going forward, but it doesn't take account of previous or already pending actions where the debt collector companies and the hedge fund that owned them, was using them to extract money from consumers," said Jim Sturdevant, a San Francisco attorney.
Sturdevant has litigated on behalf of clients against credit card companies' arbitration clauses since they were first introduced by Bank of America in San Francisco during the early 1990s.
Credit card companies had long been able to keep the arbitration system alive by registering their businesses in states whose banking laws allowing them to require consumers to submit to arbitration in the event of payment disputes.
But Minnesota officials didn't file suit until last week, on the heels of a San Francisco judge's pivotal ruling making it easier to hold arbitration companies liable for their actions.
"After we filed our lawsuit, I did receive a call from the Minnesota attorney general asking about the nature of our lawsuit, and I put our deputies in touch with the Minnesota attorney general's office," Herrera said.
Martin, who is one of several former Minnesota deputy attorneys general who have criticized Swanson for "politicizing" her office, searched the Internet for the San Francisco lawsuit as soon as he heard about Swanson's Washington victory lap.
"The city attorney of San Francisco was on this issue, and filed this complaint with strikingly similar claims, a year earlier, Martin said. "Lawyers rip off people's work all the time. But when it comes to taking credit, that should be another story."
