So, let’s say you have bad credit and you want to repair it with a group that promises it will give anyone credit… for a price. Now let’s say that that group gives you $300 in credit, but instantly charges a $29 finance charge, a $6.50 account maintenance fee and a $150 annual fee against the $300 credit limit. Further, the agreement includes a clause that compels you to arbitrate any dispute you have with the credit card company. Will a court allow you to sue the credit card company anyway, despite that provision? That’s the issue in CompuCredit Corp. v. Greenwood which is now before the U.S. Supreme Court.
I write about court cases in the Northern District of California for my blog. One case that has been moving through the federal courts, and was recently argued at the U.S. Supreme Court involved the issue of which statute governs in a case like the one above. As Judge Claudia Wilken explained at the trial court:
The CROA [Credit Repair Organizations Act] contains a non-waiver provision, which states:
Any waiver by any consumer of any protection provided by or any right [to sue] of the consumer under this subchapter— (1) shall be treated as void; and (2) may not be enforced by any Federal or State court or any other person.
15 U.S.C. § 1679f(a) (emphasis added).
This apparent clarity is muddled by the Federal Arbitration Act (FAA) which states that federal courts will stay cases where a party has a valid arbitration clause governing the situation until arbitration is complete. So, courts are split as to which statute governs. Courts in Texas and Alabama found that Congress used CROA to counter the effect of the FAA, but courts in Michigan and Pennsylvania found that Congress intended FAA to apply.
At trial, Judge Wilken sided with Mr. Greenwood and denied CompuCredit’s motion to compel arbitration. The Ninth Circuit affirmed and CompuCredit affirmed. At oral argument it seemed like the Court seemed in favor of reversing the trial court. Justice Kagan asked about the significance of Congress leaving out explicit language of enforcing the FAA, when courts have repeatedly decided that such language is mandatory. Michael McConnell, the attorney for CompuCredit, only used a fraction of his time, a general indication that there was not much disagreement with his position and the Court.