Supreme Court Hears Oral Argument In Credit Repair Organizations Act Suit

Supreme Court Hears Oral Argument In Credit Repair Organizations Act Suit

WASHINGTON, D.C. - (Mealey's) The U.S. Supreme Court on Oct. 11 heard oral arguments debating whether the words "right to sue" in the Credit Repair Organizations Act (CROA) mean only that aggrieved parties may go to arbitration to settle their claims (CompuCredit Corp., et al. v. Wanda Greenwood, et al., No. 10-948, U.S. Sup.).

 

Arguing for credit providers CompuCredit Corp. and Columbus Bank and Trust, Kirkland & Ellis attorney Michael W. McConnell contended that "right to sue" under the CROA provided only for a right to arbitration, and not to actually proceed with a lawsuit. 

"This Court has consistently rejected the argument that Federal statutes that both create a right to sue and also bar waiver of rights under the statute are sufficiently explicit to override the strong Federal policy in favor of arbitrability expressed in the Federal Arbitration Act," McConnell said, adding that in two other cases "the Court construed a statute the relative language of which is virtually indistinguishable from that and the credit repair organization fact that we have before us today." 

Justice Ruth Bader Ginsburg questioned the statute's intended meaning, asking McConnell "the statute is meant to apply to ordinary people and if an ordinary person not schooled in the law read 'you have a right to sue,' wouldn't they understand that to mean:  I have a right to sue in court?"

 Justices Samuel A. Alito Jr. and Elena Kagan and Chief Justice John G. Roberts each asked similar questions of McConnell, who responded by explaining that the Supreme Court's own precedent and Congress' subsequent failure to be more specific in its enactment of statutes are the reasons why the CROA's language is not more specific. 

Public Citizen Litigation Group attorney Scott L. Nelson argued for consumer Wanda Greenwood and other consumers that brought the original action, saying "[t]he Credit Repair Organizations Act provides consumers with what it explicitly denominates a right to sue, and then it says that any right of the consumer under the statute is non-waivable." 

"Well, Mr. Nelson, but your friend Mr. McConnell says quite rightly that the rules in this area have been fairly clear, that Congress knew it had to make especially clear that it wanted to void arbitration agreements.  So if that's the case, why didn't Congress do what it has done in a thousand other statutes -- or maybe that's an overstatement, but a number of other statutes -- which is to say so," Justice Kagan asked. 

Consumers filed a class action lawsuit in the U.S. District Court for the Northern District of California, naming the credit providers as defendants.  The consumers allege that the credit providers, who marketed a subprime credit card under the brand name Aspire Visa, violated the CROA and California's unfair competition law by charging a number of hidden fees for use of the card. 

The credit providers moved to compel arbitration of the consumer's CROA claims, which the District Court denied, along with the credit providers' motion for leave to move for reconsideration. 

The credit providers then appealed to the Ninth Circuit, which affirmed in a 2-1 ruling.  The credit providers then appealed to the Supreme Court and filed a petition for writ of certiorari on Jan. 24. 

The question presented to the Supreme Court is:  "Whether claims arising under the Credit Repair Organizations Act, 15 U.S.C. § 1679 et seq., are subject to arbitration pursuant to a valid arbitration agreement." 

[Editor's Note:  Full coverage will be in the October issue of the LexisNexis Financial Services Litigation Report.  In the meantime, the oral argument transcript is available at www.mealeysonline.com or by calling the Customer Support Department at 1-800-833-9844.  Document #88-111024-001T.  For all of your legal news needs, please visit www.lexisnexis.com/mealeys.] 

For more information, call editor Timothy J. Raub at 215-988-7740, or email him at timothy.raub@lexisnexis.com.

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