Recent Supreme Court Ruling On Credit Card Disputes Favors Businesses Over Consumers

The Supreme Court sided credit card companies recently, when it issued a ruling that any credit card claims filed by consumers will go to arbitration in lieu of being subjected to a trial in court. With this recent ruling, the high court overturned an earlier decision made by a San Francisco appellate court regarding the 1996 Credit Repair Organizations Act, ruling that it prevented what are known as "arbitration clauses" which appear in certain credit card agreements from being upheld.

Justice Antonin Scalia wrote on behalf of the 8-1 court majority that Congress had not explicitly intended to bar all arbitration of disputes when it created the 1996 law.

"Had Congress meant to prohibit these very common provisions, it would have done so in a manner much more direct" than what the Credit Repair Organizations Ace included, said Justice Scalia, according to the Los Angeles Times.

Justice Ruth Bader Ginsberg was the single dissenting vote.

The major victors in the case were CompuCredit Holdings Corp. and Synovus Financial Corp, two companies that were facing a lawsuit pertaining to their marketing of a low interest rate Aspire Visa Credit card to consumers with poor credit. The plaintiffs of that case alleged that Visa had promised them a card with a $300 line of credit, but they were then slapped with $57 worth of fees within a single year. The issuers were attempting to hold the disgruntled customers to arbitration by citing a binding clause contained within the credit card agreement.

Over the past several years, the Supreme Court has tended to rule in favor of arbitration in cases which benefits businesses. Arbitration does not cost a business as much as does settling the dispute in court, which makes it the preferable option. Additionally, professional arbitrators are generally paid by the company involved in the dispute, making it much more likely for them to favor businesses. In fact, according to The Detroit News, a Public Citizen study from 2007 revealed that consumers involved in arbitration hearings with big credit card-issuer MBNA lost some 94% of the time. However, according to businesses, arbitration is a process that is effective, fast and fair.

Bryant Park

Bryant Park is a financial consultant for one of the companies listed on Wall Street. He writes on a variety of topics ranging from credit cards to different loans that can be availed by consumers. He holds a bachelor degree in Financial Services from Dartmouth College.