Mitchell v. AMERICAN FAIR CREDIT ASS'N

The Legislature enacted the Credit Services Act of 1984 (CSA) (Civ. Code, § 1789.10 et seq.) in response to certain business practices of credit services organizations. These organizations offer to obtain credit or improve the credit standing of consumers who have experienced credit problems. The CSA sought to provide consumers with information necessary to decide whether or not to purchase such services, by requiring certain disclosures and by mandating that every credit services contract be in writing and signed by the buyer. In this case, as a matter of first impression, we address a common question arising in a novel context. Consistent with the CSA, may a credit services organization modify its membership contract to require arbitration and preclude class relief by the simple expedient of notifying its members by mail that continued membership constitutes acceptance of the modification? We conclude it may not, because the CSA requires that contract modifications be signed. We further conclude that this requirement is not preempted by the Federal Arbitration Act and affirm the trial court’s order denying in part the motion of defendants to compel arbitration.

In…