In today’s economy, the effects of a bad credit report are
devastating to consumers. Individuals with poor credit history are often crippled in their ability
to purchase even the smallest item, and consequently turn for help to credit
repair organizations advertising services that cure bad credit. Frequently, however, these
organizations merely accept high fees from customers already in dire fin
ancial
straits, without improving their financial standing. To combat these predatory practices, Congress passed the
Credit Repair Organizations Act (CROA), which imposes several requirements on
credit repair organizations. One
such provision mandates that credit repair organizations give a form to each
consumer that clearly explains their specific rights before any contract is
signed. This required disclosure
form notifies consumers that they have “the right to sue” a credit repair
organization that violates any provision of the CROA. References to this right, however, appear nowhere else in
the statute.
Many credit repair organizations include mandatory
arbitration clauses in their contracts with consumers. As a result, consumers who have received
a form notifying them of a “right to sue” may be told, by both companies and
courts, that they may not seek redress in a court of law. Circuit courts have split on the
enforceability of these arbitration agreements.
In the context of both consumer protection law and recent
arbitration jurisprudence, this Note examines the purported collision between
the CROA and the longstanding Supreme Court policy in favor of enforcing
arbitration agreements pursuant to the Federal Arbitration Act. After examining the passage of the CROA
and the history of arbitration as a mechanism for dispute resolution, this Note
analyzes the divergent approaches taken by the U.S. Courts of Appeals for the Third,
Ninth, and Eleventh Circuits in addressing this conflict. Ultimately, this Note recommends that
courts enforce these arbitration clauses in order to preserve the viability of
arbitration as an effective method of dispute resolution.