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Friday, May 6, 2011

Supreme Court Case Threatens to Further Erode Consumer Rights

This week the Supreme Court agreed to hear CompuCredit Corporation v. Greenwood, which is an appeal of a Ninth Circuit decision voiding a clause in a contract that prohibited consumers from settling disputes in class arbitration or in court. The Court’s decision to hear the case came shortly after the release of the AT&T Mobility v. Concepcion decision, which gave companies a “get out of jail free” card to rip off consumers and then prohibit them from class arbitration. The plaintiff consumers sued CompuCredit and other credit providers after signing up for a credit card that was advertised to consumers with low or weak credit scores as helping to “rebuild your credit, “rebuild poor credit,” and “improve your credit rating.” Although the credit providers’ promotional materials stated that consumers would immediately receive $300 in available credit, the credit providers charged the consumers $257 in fees in the first year.

The consumers sued the company for its deceitful tactics under the Credit Repair Organization Act (“CROA”) and California’s Unfair Competition Law. The credit providers challenged the lawsuit and argued that the fine print of the credit card contract contained a clause requiring consumers to settle all disputes in binding arbitration and prohibiting them from suing. However, the Ninth Circuit upheld the district court’s ruling that CROA voids the arbitration clause because it “specifically prohibits provisions disallowing any waiver of a consumer’s right to sue in court for CROA violations.” The consumers alleged that the deceitful claims violated CROA and argued that the plain language of the statute states that credit card agreements must inform consumers of the following: “You have the right to sue a credit repair organization that violates the Credit Repair Organization Act.” (emphasis added)

The credit providers and the Ninth Circuit dissenters claimed that CROA only requires a disclosure of the right to sue but does not create that right. The majority described the logical absurdity of such an argument: “Under such a reading, Congress, whose purpose in enacting the statute included protecting consumers from misinformation…drafted a statute which requires credit repair organizations to misinform consumers about a fictional right.” The credit providers appealed the decision and the Supreme Court agreed to hear the case.

If the Supreme Court rules in favor of the credit providers, cheated consumers will be denied access to courtroom justice in defiance of the plain language of a law designed to prevent such an outcome.

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