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Can Congress Protect a Victim's Right to File a Lawsuit?

Read the fine print before accepting a credit card offer

Three California women thought they would each get $300 in credit when they received new Aspire Visa credit cards. Instead, they now say, they were each charged $257 in unexpected fees and finance charges. So in 2008, they went to court.

Their class action lawsuit, and whether the women have the right to go to court, are the core issues in a legal dispute that has risen all the way to the U.S. Supreme Court.

 See also: Disputing a credit card charge.

The women, supported by an AARP friend-of-the-court brief, argue that Congress clearly protected them against hidden fees and guaranteed their right to go to court. CompuCredit Corp., the credit card company, insists that a binding arbitration provision in their contract prevents them from going to court. Appeals court rulings in similar cases found that, contrary to the ruling in this case, the arbitration provision is enforceable. The U.S. Supreme Court will resolve the conflict this fall.

In two other cases, CompuCredit settled with the Federal TradeCommission and the New York Attorney General's Office at a cost of $118million.

CompuCredit claims that cardholders should each be required to file individual claims in arbitration.

The women, supported by an AARP friend-of-the-court brief, argue that Congress clearly protected them against hidden fees and guaranteed their right to go to court. CompuCredit Corp., the credit card company, insists that a binding arbitration provision in their contract prevents them from going to court. Appeals court rulings in similar cases found that, contrary to the ruling in this case, the arbitration provision is enforceable. The U.S. Supreme Court will resolve the conflict this fall.

In two other cases, CompuCredit settled with the Federal Trade Commission and the New York Attorney General's Office at a cost of $118 million.

In the California case, as many as 86,800 cardholders, including the three women, sought the CompuCredit cards, which were marketed as a way to "rebuild poor credit." After the women discovered the fees and charges imposed by the cards, they sued CompuCredit. The firm argued that the card holders needed to file individual claims in arbitration.

"This case is another example of how people are losing their right to go to court to seek a remedy," said Julie Nepveu, senior attorney at AARP Foundation Litigation. At issue are provisions of the federal Credit Repair Organizations Act (CROA), a 1996 law aimed at protecting consumers against exaggerated promises and hidden provisions practiced by firms that offer services to repair consumers' poor credit standing. The legislation also says: "You have a right to sue a credit repair organization that violates the Credit Repair Organizations Act."

In the California case, Greenwood v. CompuCredit Corp., the U.S. Court of Appeals noted that "as a matter of parlance, reference and common sense, we cannot conclude that when Congress used the word 'sue,' it really meant 'arbitrate.' " The judges cited Alice in Wonderland: "Perhaps the question is, as Alice put it: 'whether you can make words mean so many different things.' " They concluded, "Congress meant what it said," that the right to sue cannot be waived.

What it means to you: If you have bad credit, a credit card offer may seem tempting, but watch out. If a credit card offer seems too good to be true, it probably is. Read the fine print. If it has an arbitration clause, you may never get your day in court. AARP's annual guide to pertinent U.S. Supreme Court cases can be found at aarp.org/litigation.

Also of interest: Is it better to use a debit or credit card? >>

Emily Sachar is a journalist and author based in Brooklyn, N.Y.

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