Monday, July 2, 2012

Missouri High Court Kiboshes Clause Waiving Class Action Arbitration In Auto Loans; Ruling Helps Borrowers Duped Into Debt-Based Car Title Ripoffs

An excerpt from Rebecca Tushnet's 43(B)log:

  • The state supreme court found that a class arbitration waiver in its contract was unconscionable and held that the remedy was to strike the entire arbitration agreement. The Supreme Court vacated that opinion and remanded in light of Concepcion.

  • On remand, the court found that the presence and enforcement of the class arbitration waiver didn’t make the arbitration clause unconscionable, but, applying traditional Missouri contract law and looking at the agreement as a whole, the court found that Brewer demonstrated unconscionability in the formation of the agreement, appropriately remedied by revoking the arbitration clause.

  • Brewer borrowed $2215, secured by the title to her car, at an APR of 300%. The contract, whose terms no consumer had ever successfully renegotiated, provided for resolution of any claim against the title company through binding individual arbitration.

  • The title company, however, reserved the right to go to court to repossess the car, or to use self-help. Unlike the agreement in Concepcion, the agreement barred fee-shifting and didn’t provide a fee multiplier or guaranteed minimum recovery if the consumer were awarded more than the title company’s last offer.

  • The cumulative real-world effect of the arbitration provisions in this case is that a consumer's minimum and maximum recovery from the title company are identical—$0.00—for no consumer ever has filed an individual claim for arbitration against the title company.”

  • Brewer made two payments of more than $1000, which reduced her loan principal by 6 cents. She filed suit alleging violations of numerous statutes, including the state merchandising practices act. The case then made its way through the courts solely on the class arbitration issue.
For the recent ruling of the Missouri Supreme Court, see Brewer v. Missouri Title Loans, --- S.W.3d ----, 2012 WL 716878 (Mo. March 6, 2012) (en banc).

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