Credit Repair Organization sued by Consumers

Wednesday, November 9th, 2011
Updated: November 9th, 2011
The content is accurate at the time of publication and is subject to change.

Consumers have the right to sue. If they are dissatisfied, they have the absolute right to sue. That principle, once a undeniable truth, is being debated by the Supreme Court this week as a company called CompuCredit, a subprime credit card company, is currently being sued by three of its customers in federal court.

The customers claim that the company practiced deceptive measures that did not comply with the 1996 Credit Repair Organizations Act, which requires that credit repair organizations treat customers fairly and openly.

Wanda Greenwood, Deborah McCleese, and Ladelle Hatfield are the three plaintiffs. All three customers signed up for a CompuCredit marketed credit card. All three customers had bad credit, and were under the impression that the CompuCredit card would help them start over and get their credit score back on track. Upon signing up for the account, CompuCredit threw in $300 of credit that would be immediately available, with absolutely no money down.

The three plaintiffs were excited, but after the monthly account fee, finance charge, and payment of the annual fee, there was only an available credit of $114.50 out of the original $300. The particular card in question was labeled as a “fee harvester.” These types of credit cards have low credit limits, but carry very high fees. CompuCredit was reprimanded for not fully revealing the scope of its fee-harvester cards. Thousands of consumers every year would fall for this trap; it got so bad that the Credit Card Accountability, Responsibility and Disclosure Act of 2009 banned these types of cards.

In this particular suit, the company is being sued for saying that customers were not allowed to bring lawsuits because of contracting issues. CompuCredit said that customers were not allowed to file lawsuits against the company because the contract between the company and these three customers said that they could only impose their rights through settlements. CompuCredit was effectively silencing the customers, as settling a dispute guarantees that the dispute will not be heard by a jury or reviewed by a judge in a public setting.

The main purpose of the act was to protect people from fake companies promising credit card repair, and offering nothing. The act clearly states that “You have a right to sue a credit repair organization that violates.” This means that the actions of CompuCredit were in direct violation, but the customers signed the contract giving away their right to a fair trial and impartial jury. That is also covered under the act, as it states, that the “waiver by any consumer of any protection” will be “treated as void” and “may not be enforced by any federal or state court or any other person.”

CompuCredit defends their position and lawyers in the camp claim that the wording of the act is not “sufficiently explicit,” and this doesn`t give the customers the right to sue if they contracted to a clause of arbitration.

This isn`t the first case of this kind. In the spring of this year, AT&T Mobility v. Concepciondealt with a case where customers unsuspectingly signed a settlement clause in a cell phone contract. Customers who signed that contract with the clause had to have their right to be a part of a class actions suit against AT&T.

All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.

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