Can You Sue Over a Credit Card Fee?

Over the last few years, the Supreme Court, under Chief Justice John Roberts has, without question, taken a hard turn to the right. This is not a condemnation or commendation; it’s simply a statement of fact. Whether you view this as a good or a bad thing depends largely on your political views.

However, critics of the current court have plenty to complain about lately, with some arguing that the Court is tripping over itself to make it as easy as possible for large corporations to ride roughshod over the rights of consumers. The court has held, in a few cases, that corporations can essentially contract themselves into immunity from certain consumer lawsuits, essentially by putting a provision saying “you can’t sue us” into their standard contracts or terms of use.

This case at issue involved a consumer lawsuit against a credit repair organization, which issued its customers a low-limit Visa card, as part of its strategy to help them rebuild a credit rating. However, the lawsuit alleged that the company charged hidden fees, which actually made their customers’ credit ratings worse than they were before, in some cases.

Under the terms of the 1996 Credit Repair Organizations Act, a federal law designed to protect consumers from fraud and/or exploitation by credit repair companies, consumers have a right to sue credit repair services that engage in deceptive practices. The law clearly states that the right to sue under those circumstances cannot be waived by the consumer, even if they sign an agreement purporting to waive that right.

However, the contract that consumers entered with the credit repair organization stated that consumers could not sue in court, and that any disputes arising from the contract would be resolved in private arbitration. Arbitration is a process by which two parties to a dispute agree to have a private entity (usually a professional arbitrator) resolve their dispute, as opposed to taking it through the judicial system. Arbitration is sometimes cheaper and less time-consuming than litigation in the courts. However, arbitration agreements often call for arbitration in a location that’s likely to be very inconvenient for the weaker party (in this case, the consumer) to get to. For example, if most of a company’s customers are in big cities on the West and East coasts, it might set the location for arbitration somewhere in the Midwest.

Furthermore, there are some concerns that arbitrators might be biased against consumers.

In this case, the credit repair company argued before the Supreme Court that their arbitration clause satisfied consumers’ right to sue for deceptive practices.

Judging by the oral arguments (summarized and linked to in the HuffPo article linked above), and the questions that the Justices asked the attorneys, it appears that a majority have already made up their mind, and they’re going to come out the side of the company, not the consumers.

Justice Ginsburg, long known as one of the more liberal Justices on the current Supreme Court, seemed to be the only one who indicated any sympathy to the arguments of the lawyer representing the consumers.

Recently, I blogged about another recent Supreme Court decision that would also seem to limit the rights of consumers who think they’ve been wronged by corporations to seek redress. In that case, the Court held that companies, through so-called “adhesion contracts,” can draft their way out of a class action lawsuit.

“Adhesion contracts” are contracts, generally between large companies and individual consumers, which are drafted by the party with the most bargaining power (usually the company), and presented to the consumer on a take-it-or-leave-it basis, with no real opportunity to negotiate the terms. Contracts for cellphone coverage are a prime example. The court held that a provision in such a contract that bars consumers from suing the company in a class action lawsuit, and instead directs them to individual arbitration, which would be far more expensive for an individual consumer.

The Supreme Court held that these provisions are perfectly valid.

In all of these cases, the court was not involved in constitutional interpretation. Instead, it was interpreting statutes that were passed by Congress. This means that if Congress disagrees with these rulings, it could change the law. And if they’re not inclined to do so, we can elect members of Congress who are.

Of course, whether or not that will actually happen depends largely on the willingness of consumers to educate themselves about these issues, and form informed opinions about them.