CompuCredit Corporation, a company based in Atlanta, Georgia, was at the center of a recent U.S. Supreme Court ruling that protects companies from lawsuits by consumers and allows them to enter forced arbitration instead.
Issues were raised over the cost of credit cards given out by CompuCredit, and some were looking to sue the company. CompuCredit, in the area of credit repair, was facing a wave of lawsuits after a district court in California and an appeals court in San Francisco ruled in favor of the company’s consumers, allowing them to sue.
A major component of this story is the Credit Repair Organizations Act of 1996. The law intends to protect people who are seeking the services of credit repair institutions. It bans false advertising and ensures that companies are providing customers with the necessary information to make the best possible decision.
The Supreme Court overruled the two California courts, giving CompuCredit the ability to send any lawsuits from disgruntled consumers to arbitration. The Supreme Court cited unclear wording in the CROA regarding arbitration as one part of their decision. They also pointed to the Federal Arbitration Act, which allows CompuCredit to take any claims made by customers and force arbitration to settle the dispute.
The decision by the Supreme Court sets a precedent that could help companies avoid potentially dangerous litigation that could cripple their operations. Granting companies the ability to force arbitration could eliminate frivolous lawsuits that consumers may file against them, and it gives credit repair institutions the necessary flexibility to operate their business.
Source: Los Angeles Times, “Supreme Court says forced arbitration OK under credit repair law,” Jim Puzzanghera, Jan. 10, 2012