Woman Must Arbitrate Payday Loan Claims

     SAN FRANCISCO (CN) – A federal judge dismissed a woman’s lawsuit accusing several banks of acting as middlemen for usurious payday lenders and ordered her to arbitrate.
     Lead plaintiff Johnetta Riley received $2,600 from four payday loans between September 2012 through May 2013, with interest rates of 25 to 30 percent, all through online payday lenders like Cash Jar and SWB Funding. She authorized the lenders to debit her checking account with Wells Fargo, through an electronic payment system called the Automatic Clearing House.
     BMO Harris Bank, N.A., First Premier Bank, and Missouri Bank and Trust were the originating banks, and giving the lenders access to the ACH network.
     Riley filed a class action against the banks in October 2013, claiming that by collecting on the loans, they allowed unscrupulous lenders to take advantage of her with illegal loans at “unconscionable rates.”
     “Indeed, it would be impossible for Illegal Online Payday Lenders to deposit payday loan proceeds or debit payday loan payments from customers’ bank accounts in states where the loans are illegal and unenforceable without defendants’ willingness to allow the illegal online payday lenders to access the ACH Network,” the federal complaint says.
     Judge Colleen Kollar-Kotelly in the District of Columbia rejected Riley’s contention that she isn’t bound by the loan agreements to arbitrate her claims.
     “The court finds that plaintiff’s factual allegations indicate that her claims arise from and are thus intertwined with the loan agreements containing the arbitration provision,” Kollar-Kotelly wrote, adding, “The court finds that plaintiff agreed to arbitrate with an undefined, but expansive class of entities conducting business with the lenders and thus cannot deny the foreseeability of having to arbitrate her claims against BMO Harris Bank and First Premier Bank. This is not a case like the cases on which plaintiff relies where the non-signatory has no relationship with the non-plaintiff signatory of the underlying agreement or has no role in performing the underlying agreement. As plaintiff’s claims rest heavily on the existence of the underlying loan agreements and defendants have a close relationship to the lenders’ activities, and a textual connection to the arbitration provisions, the court finds that plaintiff is equitably estopped from avoiding arbitration of her claims against defendants.”
     Kollar-Kotelly also rejected Riley’s argument that the court shouldn’t enforce arbitration because the loans are illegal in the District Columbia, writing, “the court finds that plaintiff’s arguments regarding the legality of the loan agreements have no bearing on defendant’s ability to enforce the agreements’ arbitration provisions.”

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