This article by Victoria Holstein-Childress discusses mandatory pre-dispute arbitration clauses in consumer financial services contracts and the Supreme Court's January 2012 decision in Compucredit v. Greenwood. In Compucredit, the Supreme Court upheld the use of such clauses in consumer credit card contracts covered by the Credit Repair Organizations Act, 15 U.S.C. § 1679 et seq., reaffirming the Court's pro-arbitration stance as recently demonstrated in AT&T v. Concepcion, in which the Court upheld a mandatory arbitration and class action waiver clause in wireless telephone service contracts with consumers.
These decisions run counter to the recent trend in which several leading banks and other card issuers have moved away from requiring arbitration in their consumer agreements or have announced that they would not enforce such agreements.
While it may be too early to assess the impact of these Supreme Court precedents on such efforts to retreat from mandatory arbitration for credit card disputes, inevitably the debate over the use of mandatory arbitration clauses in consumer credit agreements will continue given the authority Congress conferred on the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) to conduct a study of such agreements to determine whether they should be limited or eliminated.
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