In Ostreicher v. TransUnion, LLC, 2020 U.S. Dist. LEXIS 109279 (S.D.N.Y.), the plaintiff filed suit in federal court claiming that a variety of defendants, including a credit reporting agency (“CRA”) and various furnishers, inaccurately reported certain information. One of the furnishers moved to compel arbitration based on the cardmember agreement governing the relationship between the plaintiff and the furnisher. Guess what? It was successful!
One of the primary downfalls in attempting to compel arbitration of a consumer dispute is showing a court that the dispute fits within the permissible scope of arbitration, both under the contract and as a matter of law. Broad, catchall provisions that sweep in any imaginable dispute between a consumer and a furnisher are likely to be looked at unfavorably, particularly if the court believes that the consumer could not have reasonably foreseen that their claim under a consumer protection statute would be governed by the arbitration provision.
Here, the furnisher’s motion to compel arbitration was careful, targeted, and tailored. The cardmember agreement expressly stated that the furnisher might “report the status and payment history of [the plaintiff’s] Account to credit reporting agencies and other creditors.” And the arbitration provision stated in relevant part that the parties agreed to arbitrate in the event of a dispute “arising out of or relating to the Account.”
The consumer fought the motion on two grounds: first, that the arbitration provision was unenforceable because it also permitted arbitration of “any other dispute between” the consumer and the furnisher, and second, that the dispute fell outside of the scope of the cardmember agreement. The court rejected the first argument because the furnisher didn’t move to compel arbitration based on that catch-all provision. The furnisher relied on a specific arbitration provision related to the account itself, and the consumer did not dispute that this provision was reasonable. The court likewise rejected the second argument, as the dispute over the reporting of the account was indisputably related to the account—and therefore arbitrable. Additionally, the cardmember agreement expressly tied the furnisher’s credit reporting duties to the account.
It is possible to compel arbitration of disputes under federal consumer statutes—provided the party seeking arbitration does so carefully, and ties the dispute back to the reasonable expectations of the parties in the underlying contract.