Gregory Santiago

In CompuCredit Corp. v. Greenwood, the U.S. Supreme Court held that the Credit Repair Organization Act (CROA) does not preclude enforcement of binding arbitration agreements contained in contracts of credit repair organizations.  Justice Scalia wrote the majority opinion for six members of the court, Justice Sotomayor and Justice Kagan filed a joint concurring opinion, and Justice Ginsburg wrote the dissent.

Greenwood and other consumers brought a class action suit in the United States District Court for the Northern District of California against CompuCredit Corp. alleging violations of CROA when CompuCredit issued subprime credit cards to Greenwood and other class members.  In response to the suit, CompuCredit filed a motion to compel arbitration pursuant to the binding arbitration clause contained in their credit cards’ terms of service.  The District Court denied the motion on the grounds that CROA granted consumers a right to bring an initial legal action in a court of law for violations of CROA that could not be waived by a binding arbitration clause.  The Ninth Circuit U.S. Court of Appeals, and Justice Ginsburg in her dissent, agreed with the District Court.

The Supreme Court first noted that the Federal Arbitration Act reflects a liberal federal policy favoring arbitration and that outside a congressional command to the contrary, courts should enforce the terms of an arbitration agreement.[1]  The Court then found that CROA contains no such command.[2]  The Court rejected the idea that a requirement in CROA for credit repair organizations to include a disclosure statement that says consumers have “a right to sue” was a congressional command for consumers of credit repair organizations to always have a right to bring an initial legal action in a court of law.[3]  The Court found that the disclosure statement provision only created a right for consumers to receive the disclosure statement, and that the disclosure statement itself stated rights that were articulated elsewhere in law.[4]  From the majority’s perspective, the purpose of the disclosure statement was to state in layman’s terms the rights of consumers, even if the terms are imprecise.[5]

The Court also rejected the argument that the use of the term “court” in the civil liabilities provision of CROA created a right to bring action in a court of law.  The majority noted that there have been several instances where the Supreme Court has found an arbitration clause to be valid when a statute uses such phrases as “court” or “court of competent jurisdiction.”[6]

The Court’s central decision was its determination that if Congress had intended for CROA to preclude the enforcement of arbitration clauses, Congress would have explicitly stated so.  The Court then cited several examples of explicit congressional discussion of arbitration agreements, including the Commodities Exchange Act.[7]

Therefore, the Supreme Court’s decision has the effect of requiring Congress to write explicit provisions invalidating arbitration agreements if Congress desires an act to overrule the Federal Arbitration Act.  In her concurring opinion, Justice Sotomayor disagreed with the majority’s requirement that a statute must be explicit in references to arbitration agreements and stated that legislative intent can serve to derive the Congressional intent for non-explicit statutes.

In her dissent, Justice Ginsburg agreed with the Ninth Circuit that three provisions of CROA – the disclosure statement declaring that consumers had a right to sue, a provision stating that all rights granted in CROA could not be waived, and the civil liabilities provision’s reference to courts – indicated that Congress intended CROA to nullify binding arbitration clauses of credit repair organizations.

[1] 132 S. Ct. at 669.

[2] Id. at 670.

[3] Id. at 669-70. 

[4] Id. at 670.

[5] CompuCredit Corp. v. Greenwood, 132 S. Ct 665, 671 (2012).

[6] See id. (noting that the Court found in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985), the Court enforced an arbitration agreement even though a statute made a reference to U.S. district courts).

[7] See id. at 672 (“No predispute arbitration agreement shall be valid or enforceable, if the agreement requires arbitration of a dispute.”) (quoting the Commodities Exchange Act).

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