Originally from Dispute Resolution Journal

CONSUMER

Assignee’s Right to Compel Arbitration

The 8th Circuit held that because the obligation to arbitrate disputes arising out of the relation created under the contract continues after the expiration of the agreement, the creditor’s interest in the contract could be assigned, even if the consumer had settled her debt under the contract prior to the assignment.

Koch entered into a credit card agreement with FNANB in 2000. She claimed she paid off her credit card debt. Subsequently, FNANB assigned “all rights, title, and interest” in Koch’s account to Jefferson Capital, which then hired a law firm to collect on the debt. Koch sued Cambece, Jefferson Capital, and its corporate parent, Compucredit, claiming that the defendants violated the Federal Credit Protection Act and the ADT Protection Act. The defendants invoked the arbitration clause in the credit card agreement between FNANB and Koch. Koch argued that the arbitration clause was invalid and that her claims were outside the scope of the clause. The district court denied the defendants’ motion to compel arbitration after finding that there was no valid arbitration agreement between Jefferson Capital and Koch, because FNANB’s assignment to Jefferson Capital was invalid. It reasoned that absent an existing debt (since Koch argued she owned no money), FNANB had no remaining interest to assign. The defendants appealed.