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US Supreme Court: Credit Repair Act claims can be arbitrated

US Supreme Court: Credit Repair Act claims can be arbitrated

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Because the Credit Repair Organizations Act is silent on whether claims can proceed in arbitration, the Federal Arbitration Act mandates that the parties’ arbitration agreement be enforced, the U.S. Supreme Court has ruled.

A group of consumers brought suit in federal court against CompuCredit, a company that marketed a credit card that purported to help rebuild poor credit.

Pursuant to an arbitration agreement listed in the “summary of credit terms” in the credit card agreement, the company moved to compel arbitration.

A U.S. District Court concluded that the arbitration clause in the agreement was invalid and void given the CROA’s prohibition on waivers of a consumer’s right to sue in court, and denied the motion to compel. The 9th Circuit affirmed.

The U.S. Supreme Court granted certiorari and heard oral arguments in October.

Writing for an 8-1 court, Justice Antonin Scalia reversed the denial of the motion to compel.

Despite the consumers’ argument that the Act’s disclosure and nonwaiver provisions give consumers a “right to sue,” the justices said that they do not.

“Rather, [the Act] imposes an obligation on credit repair organizations to supply consumers with a specific statement set forth … in the statute. The only consumer right it creates is the right to receive the statement, which is meant to describe the consumer protections that the law elsewhere provides,” the Court said.

Had Congress intended to prohibit CROA disputes from being arbitrated, “it would have done so in a manner less obtuse,” the justices concluded.

Therefore, given the liberal federal policy favoring arbitration agreements, the FAA requires the agreement to be enforced according to its terms, the Court said, reversing and remanding.

Justice Sonia Sotomayor authored a concurring opinion, which was joined by Justice Elena Kagan. Justice Ruth Bader Ginsburg filed a dissenting opinion.

U.S. Supreme Court. CompuCredit Corp. v. Greenwood, No. 10-948. Jan. 10, 2012. Lawyers USA No. 993-3474.

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