Consumers’ Right to Sue

The question of how far companies can go in taking away their customers’ right to sue returned to the Supreme Court this week. The case involves a subprime credit card company called CompuCredit, which was sued by three customers in federal court for deceptive practices under the 1996 Credit Repair Organizations Act.

The company argued that they were barred from bringing lawsuits because their contract allowed them to enforce their rights only through arbitration, which prevents them from having their dispute resolved by an impartial judge and jury in a public court.

The act was passed to shield people from companies making bogus promises of credit repair. It says: “You have a right to sue a credit repair organization that violates” the act and a “waiver by any consumer of any protection” shall be “treated as void” and “may not be enforced by any federal or state court or any other person.” Despite that clear language, CompuCredit’s lawyer insisted that the wording is not “sufficiently explicit” to create a right to sue if a contract contains an arbitration clause.

The plaintiffs, Wanda Greenwood, Ladelle Hatfield and Deborah McCleese, each signed up for a credit card marketed by CompuCredit because it promised to help them rebuild their poor credit ratings while giving them $300 of immediate credit, for no money down.

After initial charges for an annual fee, a monthly account fee and a finance charge, however, they had credit of only $114.50. Known as a “fee harvester,” this low-credit, high-fee card was restricted in the Credit Card Accountability, Responsibility and Disclosure Act of 2009. The government also penalized CompuCredit for not disclosing the true limits of its fee-harvester cards.

In AT&T Mobility v. Concepcion in the spring, the court’s conservative majority upheld an arbitration clause in a cellphone contract that forced consumers to waive the right to take part in a class action. The case drew attention to the wide corporate effort to have a privatized system of justice barring people from their day in court. In this case, the justices should rule that a statute explicitly creating a right to sue trumps a contract allowing only arbitration.

–New York Times Editorial, October 13, 2011

And the whole world knows about it shortly thereafter
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