We are talking about a 7th U.S. Circuit Court of Appeals decision involving a payday loan company. The plaintiffs, three Illinois residents, had each borrowed money from an online payday lender. The lender was one of a handful of companies operated by one man. The plaintiffs alleged that the loans violated both state and federal lending laws, including usury laws and the Illinois Consumer Fraud and Deceptive Business Practices Act.
Again, payday loans are short-term loans that carry very high interest rates. Each of the plaintiffs borrowed $2,252, and each loan carried an annual interest rate of 139 percent. Each loan could have ended up costing the borrower $8,392.
The defendant thought the case should be dismissed. The loan agreements, the defendant said, included arbitration clauses. As a result, the plaintiffs should have taken their disputes to an arbitrator, not a civil court. Furthermore, the defendant said, the loan agreements required that the arbitration be “conducted by the Cheyenne River Sioux Tribal Nation by an authorized representative in accordance with its consumer dispute rules and the terms of this Agreement.” The “authorized representative” would be “a Tribal Elder, or … a panel of three (3) members of the Tribal Council.”
The defendant business owner is an enrolled member of the tribe. As we said in our last post, contracts frequently include “choice of law” clauses, and they may include “choice of forum” clauses as well. Illinois law recognizes these clauses as valid unless the opposing party can show that enforcing the terms would be unreasonable.
In this case, the court didn’t object as much to the arbitration taking place on the reservation; rather, the court noted that the tribal courts did not have a system of arbitration in place.
We’ll finish this discussion up in our next post.
Source: The Cook County Record, “Seventh Circuit revives class action suit over payday loans; calls arbitration clause ‘unconscionable’ and process ‘a sham,'” Jonathan Bilyk, Aug. 25, 2014
Our firm helps clients who find themselves buried in debt. Please contact us for additional information.