U.S. Court Rules for Arbitration in Credit Card Case

By James Vicini | January 12, 2012

The U.S. Supreme Court ruled on Tuesday for Synovus Financial Corp and CompuCredit Holdings Corp and said credit card claims by consumers under a 1996 law must be handled in arbitration, not in court.

By an 8-1 vote, the justices overturned a ruling by a U.S. appeals court in San Francisco that the language in the law, the Credit Repair Organizations Act, was intended to bar arbitration of claims.

The ruling was the latest in a series by the Supreme Court in recent years that generally favored arbitration. Businesses support arbitration as a less costly way to settle customer and other disputes as opposed to facing lawsuits in court.

The Supreme Court in April handed businesses such as AT&T Inc a major victory by upholding the use of arbitration for customer disputes rather than allowing claims to be brought together as a group.

CompuCredit and Synovus appealed to the Supreme Court over a lawsuit claiming the two companies marketed and issued a low-rate Aspire Visa card to people with low or weak credit ratings.

The plaintiffs said they were promised $300 in available credit, but were charged $257 in fees in the first year they had the card.

The lawsuit claimed imposition of certain fees violated the law and the companies failed to make certain required disclosures.

Three consumers sued in federal court, seeking to represent a nationwide class of holders of the credit card.

The companies sought to force arbitration of the dispute because of the binding arbitration clause in the agreement the customers signed to receive the card.

Attorneys for the plaintiffs opposed arbitration and said there have only been 116 reported cases asserting claims under the law since its enactment in 1996.

The justices agreed to decide the case after U.S. appeals courts issued conflicting rulings on whether such claims must be handled by arbitration.

Writing for the court majority, Justice Antonin Scalia concluded that the law does not preclude enforcement of an arbitration agreement.

He said that when the law was adopted in the mid-1990s, there had been increased use of arbitration clauses in consumer contracts generally and in financial services contracts in particular.

“Had Congress meant to prohibit these very common provisions, it would have done so in a manner much more direct” than what the plaintiffs suggest, Scalia said in summarizing the opinion from the bench.

He said another federal law requiring courts to enforce arbitration agreements can only be overridden by clear congressional command and that the Credit Repair Organizations Act contains no such override.

Justice Ruth Bader Ginsburg was the lone dissenter.

The Supreme Court case is CompuCredit Corp and Synovus Bank v. Wanda Greenwood, No. 10-948.

(Reporting By James Vicini, editing by Dave Zimmerman)

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