Recently, in Sgouros v. TransUnion, a federal appeals court held that TransUnion could not enforce an arbitration clause in a service agreement hidden on its web site. The court had considered the issues of arbitration clause enforceability and contract formation: whether TransUnion, one of the three big credit reporting agencies, gave its customers adequate notice that they were agreeing to arbitration by buying a credit score or clicking an “I Accept” button on its web site.
For an arbitration clause to be enforceable, it has to be proven that the consumer actually agreed to it. Unlike with written contracts, where your written signature proves that that you agreed to be bound by the terms, online agreements do not have such evidence. Instead, the company must prove that the consumer had reasonable notice of the terms of the agreement; the mere act of clicking on an “I Accept” button does not alone signify notice and agreement. TransUnion’s arbitration clause was, as the court said, “buried” on page 8 of a 10 page service agreement that was not visible to consumers, only the first three lines were displayed in a tiny box on the web page. There was nothing on the web page telling consumers that they would be making such an extensive agreement by simply making a purchase. Nor was there anything on the web page telling consumers that by clicking the “I Accept” button they were agreeing to terms contained in the service agreement, including arbitration. To see the agreement the consumer would have had to go to the “printable version.”
In fact, TransUnion was found to have “actively misled” consumers by stating in a paragraph right above the “I Accept” button that clicking on the button meant something else entirely different – that the consumer was authorizing TransUnion to obtain information from their personal credit profile to confirm their identity and display their credit data- not that the consumer was agreeing to be bound by the terms of the service agreement not visible in the tiny box.
This decision is positive for consumers, and Public Justice played a major role in this victory for consumers. Wayne Hogan serves on the board of directors of Public Justice and has served on its executive committee.