Sarah Mirando  |  February 6, 2012

Category: Legal News

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Supreme Court Rules Consumers Can’t Sue Credit Card Companies

By Matt O’Donnell

 

Supreme Court decisionCredit card consumers were dealt a major blow last month thanks to a Supreme Court decision upholding the right of credit card companies to enforce mandatory arbitration clauses that deny consumers the right to sue when they are charged excessive fees.

In an eight to one decision, the Supreme Court ruled in CompuCredit v. Greenwood that consumers cannot sue over deceptive language and hidden fees because of a small-print clause in their contracts mandating that disputes be settled through arbitration and not a lawsuit.

Plaintiffs in the CompuCredit v. Greenwood class action lawsuit argued that the Credit Repair Organization Act (CROA) requires companies to inform their customers: “You have a right to sue a credit repair organization that violates” the CROA. The Supreme Court, however, found that this provision of the CROA only applies to the right to receive the statement, not to the right to sue. The Court found that as long as parties could enforce the law in some way – such as through arbitration – the CROA is not violated.

The decision leaves consumers with little recourse to fight back over abusive practices and deceptive contracts.

“The CompuCredit decision was a huge blow to consumers, and really to all individuals in the country,” said Julia Duncan, director of federal programs for the American Associates for Justice. “I think it’s fair to say most Americans are subject to forced arbitration clauses in some aspect of their lives.”

Binding arbitration agreements are popping up in contracts with all kinds of companies, including Sony, Verizon Wireless, and numerous banks such as Wells Fargo, Chase and Capital One.

Companies argue that arbitration clauses protect them from costly legal battles. Consumer advocates, however, say they force consumers into a rigged arbitration system where the odds are stacked against them.

“The way companies are using [arbitration] is really abusive to consumers,” Duncan says. “They decide which arbitration company will be chosen, and by virtue of being able to choose who the arbitrators are, they also choose the rules of the whole arbitration process.”

Binding arbitration can also prevent class action lawsuits, which forces consumers to fight corporations alone with little resources. This means very few consumers will actually pursue their claim, especially if it is for a relatively small amount of money.  

Luckily, there may be some good news on the horizon. Last year Congress introduced the Arbitration Fairness Act, which would ban companies from unilaterally including arbitration clauses in contracts that ban lawsuits when there hasn’t even been a dispute yet.

“It simply says that you as a consumer cannot be forced to give up your right to go to court before a problem has even arisen,” Duncan says.

 
In the meantime, consumers are urged to read the fine print of their contracts before potentially signing away their right to sue.

 

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Updated February 6th, 2012

 

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2 thoughts onSupreme Court Rules Consumers Can’t Sue Credit Card Companies

  1. Anonymous says:

    I agree with you stanley.
    I have been burned by netflix, sony , wells fargo, and centurylink.
    These are all of the companies in my everyday life. because of the arbitration clause and the my 1/2 national poverty level I have become a slave or stay free but loose all of my daily connection to society. :+(

    what I would like to know is what part of our constitutional or bill of rights does this perhaps violate? or which consumer protection laws it guts or if there are any consumer protection that forbids arbitration clauses?

    following is civil rights though so sorry if off topic.

    on top of that i have lost my civil rights to use my service animal who performed tasks for my disability because of his species.

  2. Anonymous says:

    We have the Constitutional right to bring our grievances to civil court. Even putting this clause in a contract is Unconstitutional. Our Supreme Court judges are are supposed to hear cases and make decisions unbiasedly and according to the Constitution. Not by what they FEEL or THINK is the right answer. The politics and religious beliefs of a judge have no place in the court room. I am VERY disheartened with the Supreme Court decisions as of late. Note, the 14th amendment section 1. We are rapidly losing our freedoms.Our Constitution and Bill of Rights are now just pieces of old paper not much more than toilet paper in the out house. VERY sad that people don’t see this until it hits them.

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