• Court Finds That Consumer Claims Brought under the Credit Repair Organization Act are Not Arbitrable
  • June 24, 2009 | Author: Matthew Kasey Ratliff
  • Law Firm: Strasburger & Price, LLP - Dallas Office
  • Greenwood, et al. v. CompuCredit Corp., et al., 2009 U.S. Dist. LEXIS 29979 (N.D. CA Apr. 1, 2009)

    Facts: Defendant CompuCredit marketed a subprime credit card issued by Columbus Bank and Trust (“Columbus”) utilizing direct mail solicitations and the Internet. Promotional materials represented that the card could be used to rebuild credit and improve a consumer’s credit while specifying “no deposit required” and that consumers would immediately receive $300.00 in available credit. Once issued the credit card, consumers were charged a $29.00 finance charge, a monthly $6.50 account maintenance fee, and a $150.00 annual fee. These amounts were immediately assessed against the $300.00 credit limit before the consumer received the credit card. Plaintiffs brought this class action suit alleging several violations of the Credit Repair Organization Act (“CROA”). Defendants moved to compel arbitration of Plaintiffs’ claims based on arbitration language contained in documentation received and signed by Plaintiffs. Plaintiffs countered that the arbitration agreement was void under the CROA based on specific provisions in the CROA disallowing any waiver of a consumer’s right to sue in court for CROA violations.

    • Arbitrability. Under the Federal Arbitration Act (“FAA”), if the court is satisfied that the making of an arbitration agreement or the failure to comply with the agreement is not an issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement. The FAA reflects a liberal federal policy favoring arbitration agreements.
    • Credit Repair Organizations Act. § 1679c of the CROA contains detailed provisions requiring a credit repair organization to inform a consumer of his or her right to sue for violations of the CROA. 
    • Credit Repair Organizations Act. § 1679f of the CROA contains a non-waiver provision voiding any waiver by the consumer of any right of the consumer under the statute. 
    • Arbitrability. The CROA’s prohibition of a waiver of any protection provided by or any right of the consumer under this title, irrespective of the consumer’s knowledge or intent, combined with its proclamation of a consumer’s right to sue, manifest a Congressional intent that claims under the CROA are non-arbitrable.