U.S. Supreme Court Rules That Consumer Credit Card Claims Must Be Handled By Arbitration

Credit card companies scored a win yesterday, after the U.S. Supreme Court ruled that credit card claims by consumers must go to arbitration, instead of being tried in a court room. The ruling overturned one made by a U.S. appeals court in San Francisco that had said the Credit Card Repair Organizations Act was meant to bar arbitration.

The big winners in this case, which was decided in an 8-1 ruling by the justices, were Synovus Financial Corp and CompuCredit Holdings Corp. They were under fire in a lawsuit that claimed the two companies had marketed and issued a low-rate Aspire Visa card to people with weak credit ratings, says Reuters.

The plaintiffs in that case said the Visa had promised $300 in credit, but they had then been charged $257 in fees in one year. And as big businesses prefer to do, the two companies had been seeking to hold customers to arbitration instead of settling in court, citing a binding clause in the credit card agreement.

Justice Anton Scalia wrote for the majority — Justice Ruth Bader Ginsberg was the only one to dissent — and said that the 1996 law doesn’t preclude enforcement of an arbitration agreement.

“Had Congress meant to prohibit these very common provisions, it would have done so in a manner much more direct” than what the plaintiffs suggest, he said.

The Supreme Court tends to favor arbitration in cases in the last few years, which is good for businesses. For them, it’s not as expensive as facing a lawsuit to settle with the customer. It’s all about making that money, and unfortunately, that often means the consumer suffers.

Court rules for arbitration in credit card case [Reuters]