Relevant Facts: A credit card company marketed their credit cards as a way to repair damaged credit, but then charged consumers $257 in fees on a $300 borrowing limit. A group of consumers applied for and received the card without realizing they would be receiving a nearly maxed out card. They sued the credit card issuer and a related bank in federal court under the federal Credit Repair Organizations Act (CROA). The companies moved to compel arbitration under the arbitration clause that they had inserted into the fine print of their form credit card application. A federal district court denied the motion, determining that the CROA claims were designed by Congress to be nonarbitrable. The appellate court affirmed.
Question Before The Court: Whether federal statutory claims are arbitrable when the federal statutes on which the claims are based may present a conflict with the FAA.
The Opinion: Citing Shearson/American Express v. McMahon, the Court ruled that the FAA requires courts to enforce arbitration agreements according to their terms, even when federal statutory claims are at issue, unless the FAA’s mandate has been overridden by a “contrary congressional command.” Adding to the McMahon rule, the Court determined that such a command must be explicit, not implied.
The Court examined the federal legislation to determine if it conflicted with the FAA. Although the law at issue here specifically required lenders to notify consumers that they had a right to sue, the Court held that was not sufficient evidence to find that Congress intended a judicial forum to be available to all consumers seeking to enforce their rights under that law. According to the Court, the CROA created the right for consumers to receive the notice, but Congress meant that requirement to serve as “a colloquial method of communicating to consumers that they have the legal right, enforceable in court, to recover damages from credit repair organizations that violate the CROA,” and that “most consumers would understand it this way, without regard to whether the suit in court has to be preceded by an arbitration proceeding.”
The Court determined that “if a cause-of-action provision mentioning judicial enforcement does not create a right to initial judicial enforcement, the waiver of initial judicial enforcement is not the waiver of a ‘right of the [consumer].’” In other words, providing that a person has a right to sue is not enough in the Court’s view to ensure a judicial forum is available as the right to sue doesn’t really mean the right to sue in court; it just means the right to adjudicate in some forum.
It cannot be repeated enough—practically speaking, it is implausible and impracticable to expect Congress, in passing every piece of legislation, to think to include a line about arbitration. Yet, under the Court’s ruling here, if the legislative text does not either affirmatively express the judicial forum as the exclusive forum or specifically exclude the arbitral forum, where possible, courts will interpret the language as merely “the guarantee of the legal power to impose liability” in some forum, which can include arbitration.
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