US top court to decide credit card arbitration case

Mon May 2, 2011 1:22pm EDT

* At issue 1996 law, Credit Repair Organizations Act

* Court expected to hear arguments, rule in upcoming term

* Consumers promised $300 in credit, charged $257 in fees

By James Vicini

WASHINGTON, May 2 (Reuters) - The U.S. Supreme Court said on Monday it would hear an appeal by Synovus Financial Corp (SNV.N) and CompuCredit Holdings Corp CCRT.O arguing that credit card claims under a 1996 law should be decided in arbitration, not in court.

A U.S. appeals court in San Francisco ruled against the two companies and held the language in the law, the Credit Repair Organizations Act, was intended to bar arbitration of claims.

According to the lawsuit, CompuCredit and Synovus market and issue a low-rate Aspire Visa card to people with low or weak credit ratings. The plaintiffs said they were promised $300 in available credit, but were charged $257 in fees in the first year they had the card.

The lawsuit claimed imposition of certain fees violated the law and the companies failed to make certain required disclosures.

Three consumers sued in federal court, seeking to represent a nationwide class of holders of the credit card. The companies said the dispute should be handled by arbitration because of the valid agreement the customers signed to receive the card.

Attorneys for the plaintiffs opposed the appeal. They cited just 116 reported cases asserting claims under the law since its enactment in 1996.

The Supreme Court is expected to hear arguments in the case and then rule during its upcoming term that begins in October.

The justices agreed to decide the dispute after handing businesses such as AT&T Inc (T.N) a major victory last week by upholding the use of arbitration for customer disputes rather than allowing claims to be brought together as a group.

The high court ruled that an AT&T unit could enforce a provision in its customer contracts requiring individual arbitration and preventing the pooling together of claims into a class-action lawsuit or class-wide arbitration.

The ruling, which held a federal arbitration law trumped a California law, represented the latest in a series by the justices in recent years that generally favored arbitration.

The Supreme Court case is CompuCredit Corp and Synovus Bank v. Wanda Greenwood, No. 10-948. (Reporting by James Vicini, Editing by Tim Dobbyn)

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