Court Finds Arbitration Clauses Dealing with CROA Disputes are Permissible but Stays Case Pending Supreme Court Review

Adams v. ACSO of Tex., Inc., 2011 U.S. Dist. LEXIS 63406 (W.D. Tex. June 13, 2011)

Facts: Plaintiffs sued Defendant, ACSO of Texas, Inc. (“ACSO”), alleging violations of the Credit Repair Organizations Act (“CROA”). ACSO moved to compel arbitration and stay litigation based on the arbitration provision in the credit services contracts executed by Plaintiffs. Alternatively, ACSO moved to stay the case pending the U.S. Supreme Court’s decision in Compucredit v. Greenwood or for dismissal for failure to state a claim upon which relief could be granted. While the Court agreed that the case should be sent to arbitration, it stayed all proceedings pending the U.S. Supreme Court’s decision.

Arbitration. The Court determined that because the arbitration provision in the credit services contracts covered “all claims based upon a violation of any state or federal constitution, statute or regulation,” Plaintiffs’ allegations regarding violations of CROA fell within the scope of the arbitration provision.

Credit Repair Organizations Act. There is presently a split between the circuits as to whether CROA provides consumers with the non-waivable right to bring claims in court as opposed to arbitration against credit repair organizations. As the Fifth Circuit had not yet addressed the issue, the Court followed the Third and Eleventh Circuits rather than the Ninth Circuit in concluding that CROA does not exclude arbitration as a means of settling disputes under the Act. However, because the U.S. Supreme Court granted certiorari in Compucredit to resolve this issue, the Court decided to stay its order compelling arbitration pending the Supreme Court’s holding in CompuCredit.