Judge Rejects Arbitration Clause In Tribal Payday Loan Class Action

October 22, 2018 by

A Washington federal judge has denied a bid by a fintech firm and a tribal corporation through which the firm ran a payday lending business to force into arbitration a suit over exorbitant interest rates, ruling that arbitration clauses in agreements borrowers signed are invalid. The judge said the unclear loan contract language seems to intend that the tribal law of North Dakota’s Turtle Mountain band of Chippewa Indians should apply — to the exclusion of federal and state law — but he ruled that the agreement goes against public policy and cannot be upheld because it forms a substantive waiver of federal statutory rights.

The complaint alleges that the defendants’ scheme runs a payday lending business called Spotloan, operated through the tribal corporation BlueChip Financial, without being subject to federal and state law. The plaintiff alleged that the loan’s marketing infrastructure and underwriting were provided entirely by the fintech firm even though the loans were made in the name of Spotloan and the tribal entity. The loan agreements stated they would be governed by the tribe’s laws despite the tribe having no control over their financing or underwriting, the complaint said.

The complaint accuses the defendants of violating Washington usury laws — which allow just 12 percent annual interest — consumer protection laws and the Racketeer Influenced and Corrupt Organizations Act. The suit seeks a declaration that the loans are usurious and to recover damages for the proposed classes, which are estimated to each have thousands of members.


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Steve Larson
An experienced trial lawyer who handles both hourly and contingent fee cases, Steve has expertise in class actions, consumer cases, antitrust litigation, securities litigation, corporate disputes, intellectual property disputes, unfair competition claims, employment matters, and disputes involving family wealth. Steve regularly represents individuals and businesses in federal and state court and has obtained class-wide recovery in multiple class actions. A veteran practitioner, Steve's clients value his creative approach to resolving complex litigation matters.

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