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7th Circuit Refuses to Enforce Arbitration Agreement and Class Action Waiver Because Consumer Never Agreed to it Via Online Form

Any time you do anything online, even it’s just visiting a website, you usually have to agree to the company’s Terms of Service. Because these documents can be pages long and we live in an increasingly time-crunched world, very few people actually read the Terms of Service before checking the “Agree” box. Sometimes this lack of diligence gets people into trouble, but depending on how it’s presented, it could be the company that gets into trouble.

When Gary Sgouros filed a proposed class action lawsuit against TransUnion Corp. for allegedly providing worthless credit scores, the company tried to have the dispute sent to arbitration in accordance with the arbitration agreement contained in its Terms of Service.

Sgouros had paid almost $40 for the credit report in 2013 in the hopes of using it to help him negotiate a loan on a new car he was looking to purchase. But the score provided by TransUnion was higher than the number provided to the car dealership by at least 100 points. Sgouros argues this made the credit score he paid for effectively worthless.

In 2014, Sgouros filed the proposed class action lawsuit in Illinois federal court on behalf of himself and all other similarly situated consumers across the country who purchased a credit score from TransUnion any time since 2012. Sgouros is also seeking to represent a subclass of TransUnion customers in Missouri, his home state.

The consumer class action lawsuit says Sgouros never would have paid for the credit score if he had known it would be so different from the score used by lenders. The lawsuit further alleges TransUnion violated the Fair Credit Reporting Act (FCRA), the Missouri Merchandising Practices Act (MMPA), as well as the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFDBPA).

TransUnion tried to force the issue into arbitration, saying their Terms of Service require Sgouros to settle all disputes individually in arbitration.

The U.S. District Judge noted that the company’s arbitration agreement appears on page eight of the 10-page contract. But the scroll-through menu cuts off the contract at the third line. Next to the button customers can click to agree to the Terms of Service is a warning that they’re agreeing to have the company access their private information. Nothing is said about an arbitration agreement. The judge therefore ruled in favor of Sgouros.

TransUnion appealed the ruling and the case went before the Seventh Circuit Court, which upheld the lower court’s ruling. In its decision, the appellate court noted that Illinois courts have previously made similar rulings involving hyperlinked copies of user agreements. The courts agree that such contracts are enforceable only so long as the company notifies its customers that, by clicking a button, they are effectively signing the contract. As TransUnion’s site currently stands, the courts agree it looks to consumers as if they are only agreeing to have their private information accessed and used by the company.

The result will likely be very costly for TransUnion if Sgouros continues to have success in the courts and manages to force TransUnion to make payments to all the customers they’ve had over the past four years.

Our Schaumburg, Illinois consumer rights private law firm handles individual and class action gift card, data breach, privacy rights, deceptive advertising, predatory lending, unfair debt collection, lemon law and other consumer fraud cases that government agencies and public interest law firms such as the Illinois Attorney General may not pursue. Class action lawsuits our law firm has been involved in or spear-headed have led to substantial awards totalling over a million dollars to organizations including the National Association of Consumer Advocatesthe National Consumer Law Center, and local law school consumer programs. The Chicago consumer lawyers at DiTommaso-Lubin are proud of our achievements in assisting national and local consumer rights organizations obtain the funds needed to ensure that consumers are protected and informed of their rights. By standing up to consumer fraud and consumer rip-offs, and in the right case filing consumer protection lawsuits and class-actions you too can help ensure that other consumers’ rights are protected from consumer rip-offs and unscrupulous or dishonest practices.

Our Aurora and St. Charles consumer attorneys provide assistance in data breach, privacy violation, fair debt collection, consumer fraud and consumer rights cases including in Illinois and throughout the country. You can click here to see a description of the some of the many individual and class-action consumer cases our Chicago consumer lawyers have handled. A video of our lawsuit which helped ensure more fan friendly security at Wrigley Field can be found here. You can contact one of our Naperville and Wheaton consumer protection, gift card and data breach attorneys who can assist in consumer fraud, consumer rip-off, lemon law, unfair debt collection, predatory lending, wage claims, unpaid overtime and other consumer, or consumer class action cases by filling out the contact form at the side of this blog or by clicking here.  You can also call our toll free number at (877) 990-4990.