Congress must act to protect consumers against forced arbitration

Last week’s decision in CompuCredit Corp. v. Greenwood is just the newest erosion of consumers’ rights by the U.S. Supreme Court. The decision ultimately leaves credit repair companies with no accountability when they knowingly deceive their consumers by eliminating their right to a jury trial. It is also further evidence that the Federal Arbitration Act does not work for consumers or employees.

The U.S. Supreme Court held that unless a federal statute clearly signals a Congressional intent to override the Federal Arbitration Act, the arbitration clause will always be enforced. This is the case even when a statute guarantees a private right of action.

Hidden within CompuCredit’s terms of service was a forced arbitration clause which they argued supersedes Wanda Greenwood’s right to bring her case to court. Greenwood claimed the Credit Repair Organizations Act (CROA) clearly establishes her right to bring her case in front of a jury because of CROA’s provision requiring credit repair organizations’ statements to state “You have a right to sue a credit repair organization that violates the [Act],” but the U.S. Supreme Court disagreed.

This comes less than a year after the U.S. Supreme Court found AT&T (AT&T Mobility v. Concepcion) has the right to ban class-actions with forced arbitration clauses, effectively shielding companies from liability when they defraud a large number of customers of a relatively small amount of money. But the National Labor Relations Board (NLRB) recently concluded that the Concepcion decision is limited and does not include employees. The New York Times agrees with NLRB’s assessment and in an editorial over the weekend stated:

“The labor board has already correctly asserted that the law governing consumers is not the same one that governs employees, and that labor law clearly gives employees the right to jointly pursue workplace grievances, including through litigation.”

The Federal Arbitration Act is written so broadly it overrides both Congressional action and state laws intended to protect consumers. Just as David Lazarus writes, we must call on Congress to take action:

“The Supreme Court has made clear where it stands. Now it's up to lawmakers to level the playing field.”

AAJ continues to support Congressional passage of the Arbitration Fairness Act (S. 987 / H.R. 1873) in order to protect consumers from abusive forced arbitration clauses.