Summary:
In this case, a veteran found his home purchase delayed because Experian could not generate his credit report—an error caused by Experian’s system refusing to recognize his legal last name, “K.” As a result, he was forced into a higher-rate variable mortgage and an extra month of rent. He sued under the Fair Credit Reporting Act.
Experian’s defense, however, was not to correct the obvious error but to argue that the case should never see the inside of a courtroom. Relying on its “CreditWorks” monitoring product, Experian claimed the plaintiff had agreed to binding arbitration when he clicked through an online enrollment form. That arbitration clause was drafted with sweeping reach, explicitly covering FCRA claims, and even included a delegation clause that gave the arbitrator—rather than the court—the power to decide whether Experian had waived arbitration by waiting nearly a year to raise it. Judge Schroeder, following Fourth Circuit precedent in Austin v. Experian and similar cases, agreed with Experian, compelled arbitration, and stayed the case.
Commentary:
This decision highlights the collision between consumer rights under the Fair Credit Reporting Act and the near-ubiquitous arbitration clauses buried in credit monitoring services. What begins as a straightforward FCRA violation—wrongly reporting a consumer’s name and costing him thousands of dollars—ends not in open court but in private arbitration.
For consumer bankruptcy attorneys, the lesson is clear: our clients often unwittingly give up their right to sue when they sign up for “free credit monitoring” or identity theft protection products, sometimes encouraged by creditors themselves after a data breach. The arbitration clauses in these agreements are drafted to funnel virtually every dispute, including FCRA and FDCPA claims, out of the courts. And once in arbitration, damages are often narrower, discovery more limited, and precedent nonexistent.
Is arbitration so bad?
Consumers and their advocates almost uniformly resist arbitration clauses, seeing them as creditor-friendly traps. The perception is that arbitration denies transparency, limits discovery, and stifles precedent, all to the detriment of consumers. But this perhaps reflexive aversion deserves closer thought.
If arbitrators are truly neutral and professional, consumers might actually welcome arbitration. Speedier and lower-cost adjudications would benefit debtors much more than protracted litigation. If, on the other hand, arbitrators are venal and corrupt—as many suspect—then consumers might still find a silver lining or two . Self-interested arbitrators, seeing a gravy train of consumer rights claims, might decide that favoring those consumers is likely to keep more cases coming. Additionally, because the creditor pays the filing and administrative fees, flooding arbitration providers with FCRA, FDCPA, and consumer finance claims could impose massive costs on repeat players like Experian, forcing either quicker settlements or systemic change.
This paradox underscores that arbitration need not be the end of consumer remedies—it might, if strategically embraced, become a tool for pressure. Still, the loss of public precedent is profound, especially in areas like credit reporting and debt collection where systemic patterns matter. For now, district courts remain the only reliable venue for shaping consumer protection law—but only if consumers can avoid clicking “I Agree.”
For instructions on how to get a credit report but avoid "click-through", see my previous post regarding Austin v. Experian.
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