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24 Ohio St. J. on Disp. Resol. 315 (2008-2009)
Mandatory Arbitration Clauses in Payday Lending Loans: How the Federal Courts Protect Unfair Lending Practices in the Name of Anti-Protectionism

handle is hein.journals/ohjdpr24 and id is 319 raw text is: Mandatory Arbitration Clauses in Payday Lending Loans: How the Federal Courts Protect Unfair Lending Practices in the Name of Anti- Protectionism KATIE JORY* I. INTRODUCTION In the last twenty years, U.S. companies have begun to require consumers with little bargaining power to resolve disputes through private arbitration rather than in court. 1 In fact, one study estimates that the average American has unknowingly given up their constitutional rights to a public trial in up to one-third of their consumer transactions.2 While proponents of mandatory arbitration say that consumers are provided with a cheaper and more efficient forum than litigation,3 many believe that mandatory arbitration has given large firms the power to displace the judiciary from its role in enforcing common law claims and statutory rights.4 Payday lending companies are one of the many U.S. industries that have taken advantage of the Supreme Court's pro-arbitration stance to the detriment of the customers.5 J.D. Candidate, The Ohio State University Michael E. Moritz College of Law, 2009; B.A., The University of Michigan, Ann Arbor, 2005. I would like to thank my husband Brett for his understanding and support throughout the law school process and my family for being a constant source of encouragement. I Jean R. Stemlight, Creeping Mandatory Arbitration: Is It Just?, 57 STAN. L. REV. 1631, 1636 (2005). 2 Id. at 1639. 3 Id. at 1633. 4 David S. Schwartz, Enforcing Small Print to Protect Big Business: Employee and Consumer Rights Claims in an Age of Compelled Arbitration, 1997 Wis. L. REV. 33, 36- 37 (1997). 5 A victim's story: Earl Milford puts up an artificial Christmas tree in the house he shares with his son, daughter-in-law, and two grandchildren. There is no money for presents because Milford is a victim of payday loan easy money. Every month, Milford travels thirty miles to the city of Gallup and pays sixteen payday lending businesses a total of $1,500 to cover the interest on his loans. Because New Mexico does not require lenders to check if customers have borrowed money elsewhere, people like Milford are allowed to take out many loans at a time. Thus, the cycle of debt begins and continues until either financial discipline or bankruptcy occurs. Erik Eckholm, Seductively Easy, Payday Loans Often Snowball, N.Y. TIMES, Dec. 23, 2006, at Al.