                                                                                                                           Opinions of the United
2000 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


8-29-2000

Johnson v. West Suburban Bank
Precedential or Non-Precedential:

Docket 00-5047




Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2000

Recommended Citation
"Johnson v. West Suburban Bank" (2000). 2000 Decisions. Paper 180.
http://digitalcommons.law.villanova.edu/thirdcircuit_2000/180


This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 2000 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
Filed August 29, 2000

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

NO. 00-5047

TERRY JOHNSON

v.

WEST SUBURBAN BANK; TELE-CASH INC.;
COUNTY BANK OF REHOBOTH BEACH, DELAWARE

Tele-Cash Inc.; County Bank of Rehoboth Beach, Delaware,
Appellants

On Appeal From the United States District Court
For the District of Delaware
(D.C. Civ. No. 99-cv-00104)
District Judge: Honorable Gregory M. Sleet

Argued July 17, 2000

Before: BECKER, Chief Judge, SLOVITER and
NYGAARD, Circuit Judges.

(Filed: August 29, 2000)

       WALTER WEIR, JR., ESQUIRE
       SUSAN VERBONITZ, ESQUIRE
        (ARGUED)
       Weir and Partners, LLP
       1339 Chestnut Street
       Suite 500, The Widener Building
       Philadelphia, PA 19107
JAMES D. GRIFFIN, ESQUIRE
Griffin & Hackett
116 West Market Street
Mellon Bank Building
Georgetown, DE 19947

Counsel for Appellants

CATHLEEN M. COMBS, ESQUIRE
 (ARGUED)
JOHN M. BRODERICK, ESQUIRE
Edelman, Combs & Latturner
120 South LaSalle Street, 18th Floor
Chicago, IL 60603

WILLIAM L. O'DAY, JR., ESQUIRE
Law Office of William L. O'Day, Jr.
2118 Kirkwood Highway
Wilmington, DE 19805

Counsel for Appellee

CHRISTOPHER R. LIPSETT,
 ESQUIRE
ERIC J. MONGILNICKI, ESQUIRE
MICHAEL D. LEFFEL, ESQUIRE
Wilmer, Cutler & Pickering
2445 M Street, NW
Washington, DC 20037-1420

Counsel for Amici Curiae -
The Delaware Retail Council; The
New Jersey Retail Merchants
Association; The Pennsylvania
Retailers Association

                         2
       RICHARD P. ECKMAN, ESQUIRE
       STEPHEN G. HARVEY, ESQUIRE
       JEFFREY K. TECHENTIN, ESQUIRE
       Pepper Hamilton, LLP
       3000 Two Logan Square
       Philadelphia, PA 19103-2799

       Counsel for Amici Curiae -
       American Bankers Association,
       American Financial Services
       Association, Consumer Bankers
       Association, and Delaware Bankers
       Association

OPINION OF THE COURT

BECKER, Chief Judge.

This appeal arises under the Truth in Lending Act
("TILA"), 15 U.S.C. S 1601 et seq. , and the Electronic Fund
Transfer Act ("EFTA"), 15 U.S.C. S 1693 et seq. Plaintiff
Terry Johnson, who entered into a short-term loan
agreement with County Bank of Rehoboth Beach, Delaware
("Bank"), contends that the terms of the loan violated both
the TILA and the EFTA. He seeks to bring a class action
suit against both the Bank and Tele-Cash, Inc., which
acted as the Bank's agent for the loan transaction. The
Defendants respond that the dispute belongs in an arbitral
forum, as the loan agreement signed by Johnson contains
an arbitration clause. This appeal presents the question,
one of first impression in the Courts of Appeals, whether
claims under the TILA and the EFTA can be referred to
arbitration under an arbitration clause when a plaintiff
seeks to bring a claim on behalf of multiple claimants.

Johnson submits that compelling arbitration is precluded
by an "irreconcilable conflict" between the arbitration
clause and the purposes of the TILA and the EFTA. He
argues that Congress consciously inserted language into
the statutes with the intent of encouraging district court
judges to certify class actions under Fed. R. Civ. P. 23. He
further maintains that in the legislative history of

                               3
amendments to the TILA, Congress communicated that
class action remedies play a central role in the TILA and
EFTA enforcement schemes. Rather than simply provide
restitution, Johnson asserts, such litigation is meant to
serve public policy goals through plaintiffs who act as
private attorneys general, for the class action device is
necessary to ensure meaningful deterrence to creditors who
might violate the acts.

The District Court agreed with Johnson that there was
an "inherent conflict" between compelling arbitration and
the TILA and the EFTA and denied the Defendants' motion
to compel arbitration under the agreement. We will reverse.
Though there may be some tension between the purposes
of the debtor-protection statutes and arbitration, we are not
persuaded that the two are so at odds as to preclude
arbitration in this context. The Supreme Court has made
clear that the presumption in favor of arbitration
established by the Federal Arbitration Act ("FAA"), 9 U.S.C.
S 1 et seq., is a powerful one. Because neither the TILA nor
the EFTA explicitly precludes the selection of arbitration
instead of litigation, a party who agrees to arbitrate, but
then asserts that his or her statutory claim cannot be
vindicated in an arbitral forum, faces a heavy burden. That
burden has not been met here.

As a predicate to this conclusion, we note our belief that
the public interest purposes behind the civil penalty
provisions of the statutes are not in conflict with
arbitration, even if arbitration clauses may prevent the
bringing of class actions. To the extent that class actions
serve public interest goals, those goals are also met by
other provisions of the laws, which allow for enforcement of
the statutes by federal agencies that possess sufficient
sanctioning power to provide a meaningful deterrent to
creditors who violate the terms of either act. Moreover,
neither act grants potential plaintiffs any substantive right
that cannot be vindicated in an arbitral forum. While it may
be true that the benefits of proceeding as a class are
unavailable in arbitration, neither statute confers upon
plaintiffs the right to proceed as a class. Instead, the right
is merely a procedural one, arising under Fed. R. Civ. P. 23,
that may be waived by agreeing to an arbitration clause. In

                                4
sum, because we can discern no congressional intent to
preclude the enforcement of arbitration clauses in either
statute's text, legislative history, or purpose, we hold that
such clauses are effective even though they may render
class actions to pursue statutory claims under the TILA or
the EFTA unavailable.

I.

Johnson applied for and received a short-term loan for
$250 from the Bank on July 10, 1998. The loan agreement
disclosed an annual percentage rate of 917%, stemming
from finance charges of $88 for the two-week loan. Thus,
under the agreement, Johnson had to repay the loan by
making one payment of $338 two weeks after receiving his
$250. The loan agreement also contained the following
arbitration clause:

       You and we agree that any claim, dispute, or
       controversy between us . . . and any claim arising from
       or relating to this Note, no matter by whom or against
       whom . . . including the validity of this Note and of this
       agreement to arbitrate disputes as well as claims
       alleging fraud or misrepresentation shall be resolved by
       binding arbitration by and under the Code of
       Procedure of the National Arbitration Forum . . . . This
       arbitration agreement is made pursuant to a
       transaction involving interstate commerce and shall be
       governed by the Federal Arbitration Act, 9 U.S.C. [SS]
       1-16.

App. 20. The loan agreement further provided:

       NOTICE: YOU AND WE WOULD HAVE HAD A RIGHT
       OR OPPORTUNITY TO LITIGATE DISPUTES
       THROUGH A COURT BUT HAVE AGREED INSTEAD
       TO RESOLVE DISPUTES THROUGH BINDING
       ARBITRATION.

       By signing and sealing below, you agree to all of the
       terms of this Note, including the agreement to arbitrate
       disputes.

Id. at 20.

                               5
Johnson filed suit on behalf of a putative class in the
District Court for the District of Delaware, alleging that the
Bank and Tele-Cash, Inc., the bank's agent for the loan
transaction, violated both the TILA and the EFTA by failing
to properly disclose the high rate of interest, and by
requiring loan applicants to open accounts from which they
were required to irrevocably preauthorize electronic fund
transfers to pay the loan.

The Defendants moved to stay the proceedings and
compel arbitration. Concluding that arbitration was at odds
with the purposes of the TILA and the EFTA, the District
Court denied a motion to compel arbitration and stay the
proceedings or dismiss the case. The District Court did,
however, dismiss Johnson's claim that the arbitration
clause was unconscionable. The Defendants timely
appealed. The District Court had jurisdiction to hear
Johnson's action under 28 U.S.C. S 1331. Though the
District Court's refusal to compel arbitration was
interlocutory, such refusals are immediately appealable
under the FAA. See 9 U.S.C. S 16(a) ("An appeal may be
taken from . . . an order . . . refusing a stay of any action
under section 3 of this title [or] denying a petition under
section 4 of this title to order arbitration to proceed."). The
question whether the TILA and the EFTA preclude
arbitration when the plaintiff seeks to assert claims on
behalf of a class presents a question of law over which our
review is plenary.

II.

Whether a court can compel arbitration of TILA claims
when the parties' loan agreement contains an arbitration
clause but the plaintiff seeks to bring claims on behalf of
multiple claimants is a question of first impression for this
court. No other federal appellate court has squarely
addressed the issue either. A number of district courts have
ruled on the subject. Most of these rulings favor the view
that the TILA does not preclude the pre-dispute selection by
the parties of an arbitral forum should any controversy
arise. Compare Thompson v. Illinois Title Loans, Inc., No. 99-
C-3952, 2000 WL 45493 (N.D. Ill. Jan. 11, 2000); Sagal v.
First USA Bank, N.A., 69 F. Supp. 2d 627 (D. Del. 1999);

                               6
Stout v. Byrider, 50 F. Supp. 2d 627 (N.D. Ohio 1999);
Randolph v. Green Tree Fin. Corp., 991 F. Supp. 1410 (M.D.
Ala. 1997), rev'd on other grounds, 178 F.3d 1149 (11th Cir.
1999), cert. granted, 120 S. Ct. 1552 (Apr. 3, 2000); Lopez
v. Plaza Fin. Co., No. 95-C-7567, 1996 WL 210073 (N.D. Ill.
April 25, 1996); Meyers v. Univest Home Loan, Inc., No. C-
93-1783 MHP, 1993 WL 307747 (N.D. Cal. Aug. 4, 1993),
with Lozada v. Dale Baker Oldsmobile, Inc., 91 F. Supp. 2d
1087 (W.D. Mich. 2000).

In general, nothing prevents contracting parties from
including a provision in their agreements that refers
statutory claims arising under the contract to arbitration.
See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20,
26 (1991). Arbitration of statutory claims will not be
precluded absent congressional direction. "Having made the
bargain to arbitrate, the party should be held to it unless
Congress itself has evinced an intention to preclude a
waiver of judicial remedies for the statutory rights at issue."
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473
U.S. 614, 628 (1985). The burden of establishing that
Congress meant to preclude arbitration for a statutory
claim rests with the party who seeks to avoid arbitration.
See Gilmer, 500 U.S. at 26. Such intention may be found in
the text, legislative history, or in an "inherent conflict"
between arbitration and the statute's underlying purposes.
Id. (citing Shearson/American Express, Inc. v. McMahon,
482 U.S. 220, 227 (1987)). "Throughout such an inquiry, it
should be kept in mind that `questions of arbitrability must
be addressed with a healthy regard for the federal policy
favoring arbitration.' " Id. (quoting Moses H. Cone Mem'l
Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)).

It is the third category, inherent conflict, on which the
District Court based its opinion. The Court concluded that
an inherent conflict existed because "without the possibility
of class action liability looming on a creditor's horizon,
there is a very real possibility that these entities will not
voluntarily comply with the Truth-in-Lending regulations."
Johnson v. Tele-Cash, Inc., 82 F. Supp. 2d 264, 271 (D. Del.
1999). We agree that if Johnson is to prevail, it must be on
the basis of demonstrating an inherent conflict. There is
nothing in either the text or the legislative history of the

                               7
TILA to indicate that Congress intended to allow plaintiffs
to avoid binding arbitration clauses. Both the statute and
the legislative history, however, offer insight into the
question whether an "inherent conflict" is to be found
between the statute and arbitration.

A. Statutory Language

The TILA provides for civil liability for lenders who fail to
give the disclosures required by the statute. See 15 U.S.C.
S 1640. An aggrieved party is entitled to recover actual as
well as statutory damages. Statutory damages can be twice
the amount of any finance charge, but, for most
transactions, they may not exceed $1,000 or fall short of
$100. See id. SS 1640(a)(1), (2). The statute specifically
addresses the damages available in a class action, limiting
the maximum potential recovery. Plaintiffs can recover

       in the case of a class action, such amount as the court
       may allow, except that as to each member of the class
       no minimum recovery shall be applicable, and the total
       recovery under this subparagraph in any class action
       or series of class actions arising out of the same failure
       to comply by the same creditor shall not be more than
       the lesser of $500,000 or 1 per centum of the net
       worth of the creditor.

Id. S 1640(a)(1)(B). The statute further directs that

       [i]n determining the amount of award in any class
       action, the court shall consider, among other relevant
       factors, the amount of any actual damages awarded,
       the frequency and persistence of failures of compliance
       by the creditor, the resources of the creditor, the
       number of persons adversely affected, and the extent to
       which the creditor's failure of compliance was
       intentional.

Id. S 1640(a).

Though the statute clearly contemplates class actions,
there are no provisions within the law that create a right to
bring them, or evince an intent by Congress that claims
initiated as class actions be exempt from binding
arbitration clauses. The "right" to proceed to a class action,

                               8
insofar as the TILA is concerned, is a procedural one that
arises from the Federal Rules of Civil Procedure. See Fed.
R. Civ. P. 23.

B. Legislative History

Johnson relies heavily on the legislative history behind
several amendments to the TILA. After the law wasfirst
enacted, some courts were reluctant to certify class actions,
in part due to the concern that large class awards could
overwhelm lending institutions. See generally Ratner v.
Chemical Bank New York Trust Co., 54 F.R.D. 412, 414
(S.D.N.Y. 1972) (refusing to certify class of TILA plaintiffs
when "the allowance of thousands of minimum recoveries
like plaintiff 's would carry to an absurd and stultifying
extreme the specific and essentially inconsistent remedy
Congress prescribed as the means of private enforcement").
In 1974 Congress responded by enacting the limitations on
class action recovery discussed above. In so doing, it
created some legislative history that bespeaks the potential
role that class actions are meant to play in the enforcement
of the TILA's substantive requirements. Johnson contends
that this history demonstrates Congress's intent to preserve
a statutory class action remedy under the TILA.

Most of the language favorable to Johnson is found in a
report of the Senate Committee on Banking, Housing and
Urban Affairs pertaining to the 1974 amendments. We
quote from it at length.

        A problem has arisen in applying these minimum
       liability provisions in class action suits involving
       millions of consumers. If each member of the class is
       entitled to a minimum award of $100, a creditor's
       liability can be enormous. For example, if a large
       national department store chain with 10 million
       customers fails to include a required item of
       information on its monthly billing statement, it can be
       subject to a minimum liability of $1 billion in a class
       action suit

       . . . .

        The purpose of the civil penalties section under
       Truth in Lending was to provide creditors with a

                                9
       meaningful incentive to comply with the law without
       relying upon an extensive new bureaucracy. However,
       the Committee feels this objective can be achieved
       without subjecting creditors to enormous penalties for
       violations which do not involve actual damages and
       may be of a technical nature. Putting a reasonable
       limit on a creditor's maximum class action liability
       would seem to be in the best interest of both creditors
       and consumers.

       . . . .

        . . . . The Committee believes the present ambiguities
       and uncertainties with respect to class action suits
       under Truth in Lending should be clarified. Moreover,
       the Committee agrees with the Federal Reserve Board
       that "potential class action liability is an important
       encouragement to the voluntary compliance which is so
       necessary to insure nationwide adherence to uniform
       disclosure" and that such remedies should not be
       restricted to actual damages. As the Committee pointed
       out in its report on similar legislation last year,"Most
       Truth in Lending violations do not involve actual
       damages and . . . some meaningful penalty provisions
       are therefore needed to insure compliance."

        Accordingly, the Committee again decided to place an
       aggregate limitation on a creditor's class action liability
       for violations not involving actual damages.

S. Rep. No. 93-278, at 14-15 (1973). The conference report
for the final legislation is far less expansive, not discussing
the purposes of the caps in any great detail, but stating
that "[t]he limitation on class action suits was further
limited to the lesser of $100,000 or 1 percent of the net
worth of the creditor to protect small businessfirms from
catastrophic judgments." H.R. Conf. Rep. No. 93-1429
(1974), reprinted in 1974 U.S.C.C.A.N. 6148, 6153.

Several years later, the cap on class action awards was
raised from $100,000 to $500,000. At the time, the Senate
report, prepared by the Banking, Housing and Urban
Affairs Committee, noted:

        The chief enforcement tool will continue to be private
       actions for actual damages and civil penalties. . . .

                               10
        . . . . The risk of any ceiling on class action recoveries
       is that, if it is too low, it acts as a positive disincentive
       to the bringing of such actions and thus frustrates the
       enforcement policy for which class actions are
       recognized. . . .

        The Committee wishes to avoid any implication that
       the ceiling on class action recovery is meant to
       discourage use of the class action device. The
       recommended $500,000 limit, coupled with the 1%
       formula, provides, we believe, a workable structure for
       private enforcement. Small businesses are protected by
       the 1% measure, while a potential half million dollar
       recovery ought to act as a significant deterrent to even
       the largest creditor.

S. Rep. No. 94-590, at 8 (1976), reprinted in   1976
U.S.C.C.A.N. 431, 438.

Though Congress did not address the role of arbitration
in the legislative history, Johnson urges that the history
recited above demonstrates the centrality of class actions to
the TILA's effective enforcement.1 Accordingly, we turn to
consider whether an arbitration clause that precludes
bringing a class action suit under the TILA irreconcilably
conflicts with the statute.

C. Statutory Purposes

Because nothing in the legislative history or the statutory
text of the TILA clearly expresses congressional intent to
preclude the ability of parties to engage in arbitration,
Johnson must demonstrate that arbitration irreconcilably
conflicts with the purposes of the TILA. While Johnson may
be correct in arguing that Congress contemplated class
actions as a part of the TILA enforcement scheme, and even
that class actions were self-consciously promoted by
Congress in amending the statute, he falls short of
_________________________________________________________________

1. Insofar as the committee did endorse class actions, it should be noted
that the endorsement was not unequivocal. The committee said it would
be considering alternatives to class actions in the future, adding "[w]e
are hopeful that there may be workable and effective substitutes for the
class action as a consumer enforcement device . . . ." Id.

                               11
demonstrating irreconcilable conflict between arbitration
and the TILA.

1. TILA's public policy goals

Johnson focuses on the ability of a class action award to
act as a penalty against lenders who violate the TILA. This
focus is logical. The prospect of a class action award will
doubtless deter TILA violations more effectively than the
prospect that debtors will pursue individual actions, either
in court or in arbitration, because the damages available to
individuals are generally limited. See 15 U.S.C. S 1640. In
this manner, argues Johnson, class actions are central to
TILA's purposes, because the statute's civil damages
provisions are not remedial, but rather, given the frequent
absence of actual damages, are designed to deter unfair
credit practices. Phrased another way, the TILA, in
Johnson's submission, is meant to encourage private
attorneys general, and the statute as a whole is intended
for public purposes rather than private grievances. While
these arguments carry force, they are ultimately
unpersuasive, for they do not translate into a conclusion
that class actions are necessary to provide deterrence or
fulfill any of the other goals of the Act.

a. The effects of arbitration on private litigation

First, even if plaintiffs who sign valid arbitration
agreements lack the procedural right to proceed as part of
a class, they retain the full range of rights created by the
TILA. These rights remain available in individual arbitration
proceedings. The Supreme Court has made clear that when
arbitration will preserve a plaintiff 's substantive rights,
compelling arbitration in accordance with an arbitration
clause will not impede a statute's deterrent function. "[S]o
long as the prospective litigant effectively may vindicate [his
or her] statutory cause of action in the arbitral forum, the
statute will continue to serve both its remedial and
deterrent function." Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614, 637 (1985). Johnson
does not argue that the arbitral forum selected in his
agreement is somehow inadequate to vindicate any of his
rights under the TILA or that arbitrators would be unable
to afford him any relief that he could individually obtain in

                                12
a court proceeding, including injunctive relief or attorney's
fees. Cf. Randolph v. Green Tree Fin. Corp., 178 F.3d 1149,
1158 (11th Cir. 1999), cert. granted, 120 S. Ct. 1552 (Apr.
3, 2000) (reversing order compelling arbitration in a TILA
case because the clause at issue "raises serious concerns
with respect to filing fees, arbitrators' costs and other
arbitration expenses that may curtail or bar a plaintiff 's
access to the arbitral forum"); Baron v. Best Buy Co., Inc.,
75 F. Supp. 2d 1368, 1370 (S.D. Fla. 1999) (appeal
pending) (refusing to compel arbitration in a TILA case
when arbitration agreement required parties to bear own
expense for attorneys' costs in contravention of TILA
provisions that provide for recovery of attorneys' fees).

Under the prevailing jurisprudence, when the right made
available by a statute is capable of vindication in the
arbitral forum, the public policy goals of that statute do not
justify refusing to arbitrate. The notion that there is a
meaningful distinction between vindicating a statute's
social purposes and adjudicating private grievances for
purposes of determining whether a statute precludes
compelling arbitration under a valid arbitration clause was
rejected by the Supreme Court in Gilmer v.
Interstate/Johnson Lane Corp., 500 U.S. 20 (1991). That
case concerned whether claims under the Age
Discrimination in Employment Act ("ADEA") must be
available in a judicial forum. The Court concluded
otherwise, despite arguments based on the ADEA's
important social policy goals. "As Gilmer contends, the
ADEA is designed not only to address individual grievances,
but also to further important social policies. We do not
perceive any inherent inconsistency between those policies,
however, and enforcing agreements to arbitrate age
discrimination claims." Id. at 27 (citation omitted). Class
actions could be similarly effective in promoting the ADEA's
social policies, and, as discussed below, that statute lends
itself more easily to being construed as creating a
substantive right to a class action. Gilmer therefore appears
to foreclose much of Johnson's argument.

We also note that while arbitrating claims that might
have been pursued as part of class actions potentially
reduces the number of plaintiffs seeking to enforce the TILA

                               13
against creditors, arbitration does not eliminate plaintiff
incentives to assert rights under the Act. The sums
available in recovery to individual plaintiffs are not
automatically increased by use of the class forum. Indeed,
individual plaintiff recoveries available in a class action
may be lower than those possible in individual suits
because the recovery available under TILA's statutory cap
on class recoveries is spread over the entire class. Nor will
arbitration necessarily choke off the supply of lawyers
willing to pursue claims on behalf of debtors. Attorneys'
fees are recoverable under the TILA, see 15 U.S.C.
S 1640(a)(3), and would therefore appear to be recoverable
in arbitration, as arbitrators possess the power to fashion
the same relief as courts.2 In sum, though pursuing
individual claims in arbitration may well be less attractive
than pursuing a class action in the courts, we do not agree
that compelling arbitration of the claim of a prospective
class action plaintiff irreconcilably conflicts with TILA's goal
of encouraging private actions to deter violations of the Act.
Whatever the benefits of class actions, the FAA"requires
piecemeal resolution when necessary to give effect to an
arbitration agreement." Moses H. Cone Mem'l Hosp. v.
Mercury Constr. Co., 460 U.S. 1, 20 (1985) (emphasis in the
original).

b. The availability of administrative enforcement
       mechanisms

Our conclusion that there is no irreconcilable conflict
between the TILA's social policy goals and arbitration of
claims that could have been heard as part of a class action
is bolstered by the statute's administrative enforcement
provisions. These provisions offer meaningful deterrents to
violators of the TILA if private enforcement actions should
_________________________________________________________________

2. There does not appear to be a problem with securing the full range of
remedies available under the TILA in this case because Rule 20(d) of the
National Arbitration Forum, the arbitrators selected in the parties'
contract, currently authorizes arbitrators to "grant any remedy or relief
allowed by applicable substantive law and based on a Claim, Response,
or Request properly submitted by a Party under this Code." Of course if
the arbitral rules in question precluded the substantive relief made
available by the statute, or the forum otherwise presented barriers to a
plaintiff 's assertion of his or her rights, we would have a different
case.

                               14
fail to fulfill that role. The statute gives general enforcement
power to the Federal Trade Commission as the "overall
enforcing agency," and permits it to employ its powers
under the Federal Trade Commission Act, see 15 U.S.C.
S 1607(c), such as the issuing of cease and desist orders,
see 15 U.S.C. S 45. The TILA also grants enforcement
authority to the variety of federal agencies that have
jurisdiction over various lending institutions, including the
Office of the Comptroller of the Currency, the Federal
Reserve Board, and the FDIC. See 15 U.S.C.S 1607(a). In
addition to allowing these federal agencies to order the
adjustment of inaccurately disclosed finance charges, see
id. S 1607(e), the TILA cross references section 8 of the
Federal Deposit Insurance Act, 12 U.S.C. S 1818, to set
forth other enforcement powers, see 15 U.S.C. S 1607(a).
Therefore the agencies may, for example, impose monetary
penalties of up to $5,000 per day (or of $25,000 per day if
the violations are part of a pattern of misconduct), see 12
U.S.C. S 1818(i), or in some instances order the suspension
and removal of institution directors or officers, see 12
U.S.C. S 1818(e).

Johnson responds by invoking the portion of the
legislative history that speaks to the need to avoid"relying
upon an extensive new bureaucracy." S. Rep. No. 93-278,
at 14 (1973). This reference is of limited usefulness, for this
snippet of legislative history does not indicate congressional
intent that arbitration be precluded, or that individual
actions are inadequate to serve the function of deterring
violations of the TILA. It may be true that Congress saw
value in maintaining the availability of class actions, but
that does not translate to the conclusion that it intended to
preclude private parties from contracting around their
availability. Under the framework established by the
Supreme Court, legislative history may be used to
demonstrate congressional intent to preclude arbitration.
See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20,
26 (1991). When that history is used, as here, merely to
demonstrate that the judicial remedies provided for or
contemplated by a statute are important, it is of noticeably
reduced value. The importance of statutory judicial
remedies are always evident from their mere existence--
Congress obviously enacted them for a reason. Were they

                               15
not the object of a congressional goal, they would not have
been enacted. It is therefore hard to see how the legislative
history relied upon by Johnson could possibly be dispositive.3

Insofar as Congress's intent, broadly contemplated, is
concerned, we must give equal consideration to Congress's
policy goals in enacting the FAA. The statute was intended
to overcome judicial hostility to agreements to arbitrate, see
Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 219-21 &
n.6 (1985), and it reflects "a liberal federal policy favoring
arbitration agreements," see Moses H. Cone Mem'l Hosp. v.
Mercury Constr. Co., 460 U.S. 1, 24 (1983). See also H.R.
Rep. No. 68-96, at 1 (1924) ("Arbitration agreements are
purely matters of contract, and the effect of this bill is
simply to make the contracting party live up to his
agreement."). Indeed, a Senate Judiciary Committee Report
supporting the legislation explained that arbitration
provides benefits to both consumers and businesses in
speed and lower costs. "The desire to avoid the delay and
expense of litigation persists. The desire grows with time
and as delays and expense increase. The settlement of
disputes by arbitration appeals to big business and little
business alike, to corporate interests as well as to
individuals." S. Rep. No. 68-536, at 3 (1924).

Similarly, the committee found that there was general
satisfaction among participants with arbitration. See id. A
1982 House of Representatives report reached similar
_________________________________________________________________

3. Moreover, even if legislative history were dispositive, there is
similar
history accompanying the original version of the TILA that indicates the
importance of administrative enforcement in securing the rights of most
consumers. The House Report, prepared by the Committee on Banking
and Currency, explained that enforcement on the administrative level
was essential to the legislative purpose of the Act. See H.R. Rep. No. 90-
1040 (1968), reprinted in 1968 U.S.C.C.A.N. 1962, 1975. "For the
relatively unsophisticated consumer, particularly those of modest means,
administrative enforcement will provide their only protection against
unscrupulous merchants or lenders." Id. The report also characterizes
the civil remedies as secondary to the administrative ones. "While
primary enforcement of the bill would be accomplished under the
administrative enforcement section discussed above, further provision is
made for the institution of civil action by an aggrieved debtor." Id. at
1976.

                               16
conclusions, stating that "[t]he advantages of arbitration are
many: it is usually cheaper and faster than litigation; it can
have simpler procedural and evidentiary rules; it normally
minimizes hostility and is less disruptive of ongoing and
future business dealings among the parties; [and] it is often
more flexible in regard to scheduling . . . ." H.R. Rep. No.
97-542, at 13 (1982). These benefits have been similarly
recognized by the Supreme Court as being part of
Congress's intent in passing the FAA. See Allied-Bruce
Terminix Co. v. Dobson, 513 U.S. 265, 280 (1995) (citing the
1924 Senate Report and the 1982 House Report). We
therefore cannot consider the legislative history relied upon
by Johnson without giving equal heed to the clear
congressional policy behind the FAA.

In short, Johnson's reliance on the legislative history
summarized in Part II.B is fundamentally flawed. He uses
it not to show that Congress intended that parties could
avoid a valid arbitration clauses if they wished to litigate a
TILA claim, but rather, and in a more attenuated manner,
to show that class actions have important purposes under
the statute. But nothing in the cited passages demonstrates
that parties cannot choose to waive judicial remedies in
favor of arbitration. In any case, the loss of the availability
of a class action does not mean the loss of meaningful
deterrence to TILA violations, insofar as the public remedies
discussed above remain. It may be true that the
unavailability of class actions removes an incentive for
lenders to comply with the statute, but it is far from the
only incentive to do so.

We similarly do not view the fact that Congress seems to
have self-consciously encouraged class actions as
particularly telling. In acting to ease the certification of
classes, see supra Part II.B, Congress did nothing to
preserve the right to a class action over arbitration or
preclude opting for arbitration. Rather, it only altered the
factors that judges consider in determining whether to
allow the procedural right of a class action to be exercised.
Notably, Congress did not add language compelling judges
to recognize prospective classes under any circumstances.
One can therefore look at the 1974 and 1976 amendments
as efforts by Congress to place class actions on the same

                               17
footing as any other lawsuit, no more or less subject to
arbitration than a cause of action arising under any other
statute.

2. Substantive Rights

Johnson also argues that the TILA does effectively create
an unwaivable right to bring a class action. The strongest
statement of this argument is as follows. Congress enacted
a scheme in which the court hearing a class action could
set a damage figure up to a certain amount for certain
patterns of conduct. This judicial flexibility in imposing
damages up to $500,000 only exists if a class action is
allowed, as individual plaintiff claims are generally capped
at $1,000. Therefore, a right of classes to a judicially
crafted punitive remedy is lost if this court orders
arbitration of Johnson's claims. Similarly, if class actions
are precluded, arbitrators acting in lieu of courts would not
have a basis for considering, in connection with a class
remedy, the frequency and persistence of compliance
failures by the creditors, the number of persons adversely
affected, or the creditors' intent. See 15 U.S.C. S 1640(a).4

This argument is unavailing in light of Gilmer v.
Interstate/Johnson Lane Corp., 500 U.S. 20 (1991). The
ADEA, at issue in Gilmer, presented far more powerful
textual support than the TILA for concluding that there is
a right to proceed collectively despite the existence of an
arbitration clause. The ADEA actually provides for collective
litigation. See 29 U.S.C. S 626(b) (referencing the remedies
in 29 U.S.C. S 216). "An action . . . may be maintained
against any employer (including a public agency) in any
Federal or State court of competent jurisdiction by any one
_________________________________________________________________

4. This court has never addressed the question whether class actions can
be pursued in arbitral forums, though it appears impossible to do so
unless the arbitration agreement contemplates such a procedure. See
Champ v. Siegel Trading Co., 55 F.3d 269, 274-75 (7th Cir. 1995). At
oral argument, the parties indicated that the rules of the National
Arbitration Forum, which govern the arbitration agreement here,
preclude the joinder of actions unless all parties affirmatively consent.
We therefore assume, for purposes of this appeal, that Johnson's effort
to pursue his claims as a representative of a class would be precluded
by enforcement of the arbitration clause.

                                18
or more employees for and in behalf of himself or
themselves and other employees similarly situated." 29
U.S.C. S 216(b) (emphasis added). In short, the statute
creates a right to sue collectively, which is not similarly
created by the TILA. Yet the Supreme Court still ruled that
the ADEA did not preclude arbitration notwithstanding the
unavailability of the class action remedy there (and also
notwithstanding all of the public interests vindicated by the
statute as discussed above in Part II.C.1). See Gilmer, 500
U.S. at 32.

Johnson argues that Gilmer is taken out of context vis-a-
vis the provision for class actions because the Supreme
Court noted that the EEOC, in enforcing the ADEA, could
still seek class-wide relief, while the FTC is not similarly
capable. We do not believe that this argument carries any
force. As discussed above, powerful punitive enforcement
mechanisms remain available to administrative bodies
under the Act even if these tools are not in the form of class
actions.

Furthermore, simply because judicial remedies are a part
of a law does not mean that Congress meant to preclude
parties from bargaining around their availability. This is
manifest in the Supreme Court's treatment of the
availability of class actions in Gilmer."But `even if the
arbitration could not go forward as a class action or class
relief could not be granted by the arbitrator, the fact that
the [ADEA] provides for the possibility of bringing a
collective action does not mean that individual attempts at
conciliation were intended to be barred.' " Gilmer, 500 U.S.
at 32 (quoting Nicholson v. CPC Int'l Inc., 877 F.2d 221, 241
(3d Cir. 1989) (Becker, J., dissenting)) (alteration in the
original). The same holds true for the TILA. Even if we were
to conclude that the statute implies a right to proceed as a
member of a class, Gilmer indicates that rights of this
nature are waivable so long as the rights the statute was
designed to protect may be vindicated by other means. We
do not think this unfair. Only those who consent to credit
agreements with binding arbitration clauses are forced to
abandon this procedural avenue; those who do not consent

                               19
to arbitration in their contracts have the full selection of
forums.5

In sum, Johnson's arguments that the TILA precludes
arbitration are unpersuasive. "[I]f Congress intended the
substantive protection afforded by a given statute to
include protection against waiver of the right to a judicial
_________________________________________________________________

5. Of course even when arbitration clauses are included in agreements,
they may be set aside if they are fraudulently induced or are in some
way unconscionable. As noted above, Johnson did allege that his
arbitration clause was unconscionable, but the District Court found no
basis for the conclusion that the clause was in any way oppressive, in
large part because the clause did not create an arbitration procedure
that favors one party over another. See Johnson v. Tele-Cash, Inc., 82 F.
Supp. 2d 264, 279 (D. Del. 1999). Though Johnson complains on appeal
that the arbitration clause was a contract of adhesion, he does not make
any argument to contradict the District Court's conclusion that the
arbitration clause is not unconscionable.

Johnson also claims that waiver of judicial remedies through a
contract of adhesion violates the Equal Credit Opportunity Act ("ECOA"),
which prohibits discrimination against any credit applicant who
exercised a right created under the chapter of the U.S. Code that
includes the TILA. See 15 U.S.C. S 1691. But Johnson does not properly
allege that there has been any discrimination, or that he exercised any
right under any act. Johnson's purported authority for the proposition
that the ECOA is applicable is Owens v. Magee Fin. Serv., 476 F. Supp.
758 (E.D. La. 1979), and Bryson v. Bank of New York, 584 F. Supp.
1306 (S.D.N.Y. 1984). Both cases, however, presented strikingly different
facts from those at issue here, as they involved oppressive conduct
against individuals who actively sought to assert rights under the TILA.
In Owens, a creditor defendant, already being sued for a TILA violation
by the debtor, made additional credit contingent on the debtor's signing
a settlement document of her active lawsuit. See Owens, 476 F. Supp.
at 768. Bryson involved a denial of a loan application simply because an
applicant inquired about the ability to obtain a loan without taking
credit insurance. This was a violation because TILA provides consumers
with the right to refuse to purchase such insurance unless the premium
is included in the statement of the finance charge of the loan. See
Bryson, 584 F. Supp. at 1318.

These differences aside, Johnson plainly cannot claim that Defendants'
conduct violated the ECOA or its implementing regulation because, as
we discuss in the text, we hold today that the arbitration clause
contained in the loan agreement did not serve to deprive Johnson of any
rights held under the TILA.

                               20
forum, that intention will be deducible from text or
legislative history." Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985). No such
intent is deducible here.

III.

The District Court further held that compelling
arbitration of claims arising under the EFTA irreconcilably
conflicts with that statute as well. This ruling was based on
the fact that the EFTA contains limitations on class action
recovery that mirror those contained in the TILA. Compare
15 U.S.C. S 1640(a), with 15 U.S.C.S 1693m(a). The District
Court inferred that Congress's use of identical language
bespoke identical goals, and that Congress was seeking to
encourage the certification of class actions under the EFTA
as it had under the TILA. Because the Court had concluded
that this goal created an inherent conflict with arbitration
in the TILA context, it followed that the same conflict was
manifest when EFTA claims were arbitrated. See Johnson v.
Tele-Cash, Inc., 82 F. Supp. 2d 264, 272 (D. Del. 1999).
While we agree that resolution of the arbitration issue with
respect to TILA claims would also apply to the EFTA, our
disagreement with the District Court about whether the
TILA precludes compelling arbitration commands a
similarly contrary conclusion about the EFTA issue. The
EFTA's class action language was drafted in 1978, after the
identical language was placed in the TILA by the 1974 and
1976 amendments. See Electronic Fund Transfer Act, Pub.
L. No. 95-630, S 915, 92 Stat. 3737 (1978) (codified at 15
U.S.C. S 1693m(a)). We do not believe that Congress would
have different intended meanings for identical statutory
language contained in similar statutes. Because there is no
irreconcilable conflict between arbitration and the goals of
the TILA, we similarly hold that claims arising under the
EFTA may also be subject to arbitration notwithstanding
the desire of a plaintiff who previously consented to
arbitration to bring his or her claims as part of a class.

The order of the District Court denying the motion to stay
proceedings and compel arbitration will be reversed and the

                                21
case remanded for further proceedings consistent with this
opinion.

A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit

                                22
