TransUnion Can’t Use Its Slick Website Design to Trick Consumers Into Giving Up Their Day in Court
by Leslie Bailey
It’s bad enough that corporations can force consumers and workers to agree to give up their right to go to court, and submit claims to private, corporate-selected arbitrators, in order to buy a product or get a job. But some corporations have been pushing the envelope even further by changing what it means to say that someone “agreed” to those fine print clauses. Many arbitration clauses are now harder to find and hidden deeper from consumers’ eyes than ever before.
You’ve probably heard some of the ugly-but-true stories: auto makers hiding arbitration clauses in warranty booklets inside glove compartments; signs in store windows declaring that anyone who walks in “agrees” to give up their right to court; and even a popular cereal company trying to force people who surfed its website into bringing any disputes to arbitration. Given how common it is for businesses to use tricks and traps in the never-ending quest to keep themselves from being held accountable for breaking the law, you wouldn’t be crazy to think there are no longer any limits on Corporate America’s power when it comes to sneaking abusive terms into the fine print.
But on Friday, the U.S. Court of Appeals for the Seventh Circuit announced that TransUnion – one of the three big credit reporting agencies and one of the most powerful corporations in America – had gone too far in trying to slip an arbitration clause past consumers in a way they wouldn’t notice. In Sgouros v. TransUnion, the court ruled that TransUnion can’t enforce an arbitration clause hidden in a service agreement on its website. This is big news.
Gary Sgouros filed a lawsuit against TransUnion after he tried to finance a car and discovered that the credit score he had purchased from TransUnion was 100 points higher than the one the lender had, rendering it basically worthless when it came to figuring out his creditworthiness. To his surprise, TransUnion responded to the suit not by contesting the charges, but by arguing the case could not be brought in court at all (even if TransUnion’s credit score was completely worthless). According to the company, Gary had agreed to arbitrate disputes when he clicked a button on TransUnion’s website during the process of purchasing the credit score.
But for an arbitration clause—or any contract term—to be enforceable, there has to be proof that the consumer actually agreed to it. When it comes to online transactions, unlike a paper contract, there’s no signature to show that the parties are aware of the terms. That means that, unless there’s proof that a consumer was notified of contract terms, the act of clicking a button (or making a purchase) does not signify agreement.
In TransUnion’s case, as the Seventh Circuit recognized, there was not reasonable notice that customers buying credit scores on TransUnion’s site were agreeing to arbitration. In fact, the company hid its arbitration clause where it could only be found “if one searched long enough.” The clause appeared on page 8 of a 10-page service agreement that was not displayed for customers; only the first three lines of the service agreement were visible, in a tiny box on the web page. It was easy to miss the agreement, because there was no mention of the terms in the box—or any contract terms—anywhere else on the web page.
There was nothing telling customers they would become bound by the terms simply by making a purchase. And nothing telling them that they would be agreeing to arbitration by clicking the button at the bottom of the screen.
This lack of reasonable notice alone would have been enough to make the clause unenforceable.
But TransUnion went even further. As the court recognized, the company “actively misled” customers about what they were agreeing to. Here’s how the trick worked: At the bottom of the web page, there was an “I Accept” button that users had to click to continue the process of purchasing a credit score. There was a paragraph right above the button instructing users that, by clicking on that button, they would be authorizing TransUnion to obtain information from their personal credit profile to confirm their identity and display their credit data. In other words, TransUnion’s webpage not only failed to inform users that clicking the button would (supposedly) signify accepting the terms in the tiny box; it actually told them that clicking the button meant something else entirely.
The court ruled that, under these circumstances, no enforceable agreement to arbitrate was formed. That means Gary Sgouros will have the chance to prove his case in court, where he intends to fight for all the other consumers who spent their hard-earned money on TransUnion’s allegedly worthless credit score.
In drawing the line at TransUnion’s deception, the Seventh Circuit sent a clear message to Corporate America: no matter how big you are or how much money you have, you aren’t allowed to trick consumers into giving up their rights by hiding contract terms through slick website design. And by the same token, while a corporation might think it’s a good idea to stick an arbitration clause in the back of a warranty booklet in a glove compartment where consumers will never see it, it’s against the law to strip Americans of our rights without giving us reasonable notice of the terms of the deal so that we can decide for ourselves whether it’s a bargain we’re willing to accept.
This is good news for us all. Given how much business we conduct on the Internet, it’s good to know the rules of basic fairness and contract law still apply. And while it may sometimes seem otherwise, this decision shows that there are still limits on what corporations can get away with.
Leslie Bailey was lead counsel for Gary Sgouros and argued the case before the Seventh Circuit. Co-counsel were Gabriel Hopkins, Michael Reese, and Christopher Sanchez.