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Financial Services Law Insights and Observations

U.S. Supreme Court Rules Credit Repair Organizations Act Does Not Override Arbitration Agreements

Credit Cards Arbitration U.S. Supreme Court CROA


On January 10, the U.S. Supreme Court ruled (8-1) that the Credit Repair Organizations Act (CROA) does not override the Federal Arbitration Act’s (FAA) broad requirement that arbitration agreements be enforced according to their terms. CompuCredit Corp. v. Greenwood, No. 10-948, 2012 WL 43514 (Jan. 10, 2012). This case involves a proposed class of consumers alleging CompuCredit violated the CROA when it marketed and provided a no-deposit credit card to consumers with poor credit and then charged fees against the credit limit. CompuCredit sought to compel arbitration to enforce the terms of the card agreement, which mandated individual arbitration of disputes. The district court and Ninth Circuit both sided with the proposed class, finding the arbitration clause in conflict with the CROA’s “right to sue” provision and therefore void. On appeal, the consumer respondents urged the Supreme Court to follow the Ninth Circuit and hold that because the CROA requires a disclosure that a consumer has the right to sue a violating credit repair organization, and because the CROA prohibits waiver of any right given under the CROA, the right to file suit cannot be waived by an arbitration agreement. The Supreme Court rejected the Ninth Circuit’s line of reasoning and reversed, holding instead that (i) the FAA establishes a liberal policy requiring enforcement of arbitration agreements according to their terms, (ii) the CROA is silent on arbitration and its disclosure provisions do not create a right to sue that overrides the broad FAA mandate, and (iii) Congress could have specifically prohibited arbitration provisions in the CROA.

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