Supreme Court Rules in Favor of Arbitration of Credit Card Disputes

by Mercator Advisory Group 0

The Supreme Court has again upheld the use of arbitration in cardholder/issuer credit card disputes. This is the latest in a series of cases attacking arbitration as a business-favoring means of dispute resolution that supplants the consumer’s right to sue. This particular case was filed in the context of credit repair card programs specifically, although the ruling reinforces the use of arbitration in disputes.

The suit was filed in 2008 by Wanda Greenwood of Oakland, who accused CompuCredit Corp. of deceptive practices in marketing its Aspire Visa credit card to help consumers “rebuild poor credit.” A federal judge certified the suit as a class action on behalf of more than 100,000 customers in California.

In 2009, U.S. District Judge Claudia Wilken of Oakland ruled that the Credit Repair Organizations Act, signed by President Bill Clinton in 1996, entitled consumers to take credit-repair companies to court. Wilken said the law’s express recognition of a “right to sue” could not be waived, despite a small-print arbitration agreement on Aspire Visa application forms.

The Ninth U.S. Circuit Court of Appeals in San Francisco agreed in a 2-1 ruling in 2010, parting company with interpretations by federal appeals courts in Atlanta and Philadelphia.

But the Supreme Court, in an opinion by Justice Antonin Scalia, said the “right to sue” stated in the 1996 law meant only that consumers were entitled to recover damages for deceptive business practices, and did not preclude companies from enforcing arbitration agreements.

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