Bloomberg News

Credit-Repair Companies Can Force Arbitration, Court Says

January 12, 2012

(Updates with vote in second paragraph.)

Jan. 10 (Bloomberg) -- Companies that promise to fix bad credit records can force customers to take disputes to an arbitrator instead of a judge, the U.S. Supreme Court ruled.

The justices, voting 8-1, today said units of CompuCredit Holdings Corp. and Synovus Financial Corp. could enforce agreements, signed by customers, that require arbitration of claims stemming from credit cards marketed as a means of rebuilding poor credit. Three customers say the cards’ fees -- $257 in the first year alone -- were disclosed only in the fine print of the promotional materials.

The ruling extends prior high court decisions favoring arbitration. The latest case turned on a 1996 law aimed at preventing so-called credit repair companies from ripping off unwary customers. The measure, known as the Credit Repair Organizations Act, says consumers have the “right to sue” companies that violate the law.

The majority today said that language doesn’t mean consumers can go to court even if the application they signed says they must arbitrate all disputes. The court pointed to the Federal Arbitration Act, which encourages the use of arbitrators.

The ruling reversed a decision from a San Francisco-based federal appeals court that had let the suit go forward.

CompuCredit Corp., whose parent company is based in Atlanta, marketed and serviced the cards. Synovus Bank, whose parent is based in Columbus, Georgia, issued the cards.

The case is CompuCredit v. Greenwood, 10-948.

--Editors: Justin Blum, Laurie Asseo

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net.

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net.


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