January 10, 2012

January 10, 2012:
Supreme Court holds that the FAA requires enforcement of a credit card issuer's arbitration agreement with its customer despite the CROA required language "You have a right to sue . . . ."   CompuCredit Corp. v. Greenwood, 565 U.S. 95 (2012
).

The Credit Repair Organizations Act ("CROA") requires that credit repair organizations provide consumers with a statement saying "You have a right to sue . . ." for violations of the Act and that any waiver of a protection provided by the Act is void.  CompuCredit provided the Greenwoods with a Visa credit card.  In their application, the Greenwoods agreed to a provision for binding arbitration.  When they filed a class action suit against CompuCredit for violations of the CROA, a California district court and the Ninth Circuit Court of Appeals concluded that the CROA provided the Greenwoods with a right to sue in court and that the arbitration agreement was unenforceable.  The Supreme Court reversed.

Justice Scalia delivered the Court's opinion.  The FAA requires enforcement of an arbitration agreement, even when the claims at issue are federal statutory claims, unless the FAA "mandate had been 'overridden by contrary congressional command.'"  565 U.S. at 98.  Justice Scalia determined that the CROA provision requiring the consumer statement did not create a right to sue.  Instead, it only created a right to receive a statement that describes the right, created elsewhere in the Act, to enforce liability for violations of the Act.  Id. at 99-100.  In many cases, the Court has enforced arbitration agreements to require arbitration of a cause of action created by federal statute, even when the statute discussed enforcement of the cause of action in the context of a civil suit.  Id. at 100-01.  Had Congress meant to prohibit arbitration provisions in credit repair organization contracts with consumers, it would have said so more clearly.  Id. at 103-04.  "Because the CROA is silent on whether claims under the Act can proceed in an arbitrable forum, the FAA requires the arbitration agreement to be enforced according to tits terms."  Id. at 104.

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