Supreme Court Hears Credit Card Arbitration Case

The U.S. Supreme Court Tuesday heard oral arguments in a case that attempts to answer the question, “Can a company forbid consumers to sue them in court even though law expressly says it can’t?”

The case, CompuCredit vs. Greenwood, began when some consumers felt they were getting a raw deal from the company after it issued them low-limit credit cards with high fees in the guise of being a credit repair program. CompuCredit claimed that although the Credit Repair Organizations Act gave consumers an express “right to sue,” that right was satisfied by sending the disputes to arbitration.

A divided Ninth Circuit Court panel agreed with lower court rulings, reading the phrase “right to sue” to plainly mean a suit in a court of law, not “an opportunity to submit a dispute to arbitration.” CompuCredit has appeal that decision to the high court.

Most of the questioning (transcript) on Tuesday centered around precedent rather than questions of law. Nearly all of the justices that spoke raised questions about the company’s reading of the law. But the attorney for CompuCredit kept coming back to previous decisions from the Supreme Court on the matter of forced arbitration.

The case is an interesting one to watch for the ARM industry as it deals directly with the legal path financial services companies can take with legal actions filed against them.