Consumers with complaints unlikely to have a day in court

arbitration can be arbitrary

Date published: 1/26/2012

WASHINGTON

Businesses love arbitration. Companies argue that it keeps legal costs down and can limit class-action lawsuits, which they warn can result in higher consumer prices.

But consumer advocates say that such provisions are unfair since they deny consumers the chance to have their disputes settled by a judge or jury.

Groups such as Public Citizen argue that people must waive their legal rights because arbitration clauses are presented in contracts on a take-it-or-leave-it basis. In other words, if you want the service or credit card, you have no choice but to agree to settle a dispute in arbitration.

Despite the complaints from consumer advocates, mandatory arbitration clauses aren't going away. This month, the Supreme Court ruled 8-1 in favor of CompuCredit Corp., overturning a decision by the 9th U.S. Circuit Court of Appeals that said cardholders could sue the company. The customers filed their class-action lawsuit after discovering that their Aspire Visa cards, which were marketed to people with poor credit scores, came with a lot of hidden fees. Consumers complained a card that was promoted as having an upfront $300 credit line was hit with initial fees that totaled $257, leaving them with not much of an available balance.

The key to the case was the federal Credit Repair Organizations Act, which was enacted to address deceptive and abusive credit repair business practices. Justice Antonin Scalia, writing for the majority, said the law wasn't clear on whether consumers had a right to sue in court.

"Had Congress meant to prohibit these very common provisions in the CROA, it would have done so in a manner less obtuse," Scalia wrote.

In the lone dissent, Justice Ruth Bader Ginsburg said the other justices were not considering the law as a consumer might.