WGTUniverse: You have a couple options, you can screenshot the conversation and send it to members services so that they can advise this player to follow the community guidelines or you can turn off chat completely but this will prevent all communication during games.
The problem with that approach is that CS, which is usually fantastic, doesn't always read the conversation correctly. I had someone post some pretty nasty things to my wall. I sent the stuff to CS, and they disabled my account for 2 days!
Obviously, my account was eventually restored. But I lost my CDP bonus which had gotten up to 780 days. It's back up over 100 days now. But it doesn't always work out well for the person reporting. Jus sayin.