On January 10, the U.S. Supreme Court ruled in CompuCredit Corp. et al. v. Wanda Greenwood et al. that the Credit Repair Organizations Act (“CROA”) does not override arbitration clauses in agreements between consumers and credit repair organizations.  The CROA prohibits credit repair organizations (i.e., companies that seek to improve a consumer’s credit history or provide financial counseling regarding a consumer’s credit history) from making false or misleading statements with respect to a consumer’s credit history or the company’s services, requires credit repair organizations to memorialize the services to be provided to a consumer in a written agreement that contains certain disclosures, and gives a consumer the right to cancel a contract with a credit repair organization.  The CROA is subject to enforcement by the Federal Trade Commission, state attorneys general, and private litigants.

In CompuCredit Corp., the plaintiffs alleged that CompuCredit violated the CROA by representing to consumers that its credit card could be used to rebuild poor credit histories.  The plaintiffs sought to invalidate an arbitration clause in CompuCredit’s card agreement based on language in the CROA requiring a credit repair organization to inform consumers of their right “to sue a credit repair organization that violates the [CROA].”  The Court held that such language was too “obtuse” to invalidate arbitration clauses, relying on the general preference for the enforceability of arbitration clauses grounded in the Federal Arbitration Act and applicable Court precedent.

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Photo of Mike Nonaka Mike Nonaka

Michael Nonaka is a partner in the firm’s Financial Institutions practice group. He represents banks and other financial institutions on a wide variety of bank regulatory, enforcement, legislative and policy issues.  Mr. Nonaka also is co-chair of the firm’s Fintech Initiative and works…

Michael Nonaka is a partner in the firm’s Financial Institutions practice group. He represents banks and other financial institutions on a wide variety of bank regulatory, enforcement, legislative and policy issues.  Mr. Nonaka also is co-chair of the firm’s Fintech Initiative and works with a number of banks, lending companies, money transmitters, payments firms, technology companies, and service providers on innovative technologies such as big data, blockchain and related technologies, bitcoin and other virtual currencies, same day payments, and online lending.