Supreme Court Sides with Issuers in Credit Card Arbitration Case

The U.S. Supreme Court ruled Tuesday that consumers that sign credit contracts with arbitration clauses cannot dispute charges and fees in court cases, despite a 1996 law that expressly allows consumers to file such actions.

The case, CompuCredit Corp and Synovus Bank v. Wanda Greenwood, arose when a consumer filed a suit against the credit card issuers that sought class action status. Greenwood objected to the fees CompuCredit charged on a low-balance subprime credit card.

But the credit agreement signed by Greenwood had a binding arbitration clause. The creditors attempted to invoke the clause, leading to the suit. Lower court rulings, including the penultimate appeals court case, favored Greenwood, citing the Credit Repair Organizations Act which specifically allows consumers to bring fee disputes to court.

The Supreme Court’s ruling argued that binding arbitration clauses in credit contracts trump the 1996 federal law. Referencing the law and the plaintiff’s argument that it was intended to prevent forced arbitration, Justice Scalia wrote for the majority, “Had Congress meant to prohibit these very common provisions, it would have done so in a manner much more direct.”

The Court voted 8-1 in favor of the defendants, with Justice Ginsburg dissenting. Justice Sotomayor wrote a separate, but concurring, opinion which was joined by Justice Kagan.

The Supreme Court heard oral arguments in the case in October.