Do you live in Florida? Better yet, have you received a payday loan in Florida? If so, you might be entitled to free money courtesy of our local loan provider due to a recent U.S. Supreme Court ruling in Buckeye Check [i]. Have you felt like the interest rate charged for your payday loan was abnormally high? The Buckeye case established that Florida payday loan lenders could not charge interest rates higher than permitted by Florida law.
Background on Buckeye
John Cardegna and Donna Reuter participated in a traditional payday finance loan with Buckeye Check Cashing. They signed an agreement, accompanying each transaction, which included two arbitration clauses. Arbitration is a form of dispute resolution where an arbitrator decides a decision unilaterally without a court or jury involved. [ii] Arbitration decisions are binding and generally not appealable [iii]. Cardegna and Reuter filed suit because of the abnormally high interest charges they incurred on their payday advances in violation of Florida consumer-protection laws[iv].
The Supreme Court held that the decision should have been left to the arbitrator, thereby expanding the scope of the Federal Arbitration Act [v] to contracts that would be voided in court, with severable arbitration clauses, such as the one in Buckeye.
Subsequent decisions have continued to maintain the broad scope of the Federal Arbitration Act and when arbitration clauses are enforceable. Plaintiffs attempted to distinguish one case, Preston v. Ferrer [vi], by arguing that an unlicensed talent agent’s dispute should go in front of a state labor commission’s office before continuing into binding arbitration. There, like in Buckeye, the Supreme Court held that the Federal Arbitration Act compelled arbitration even when another dispute resolution body had authority under a state doctrine if the arbitration clause was sound. The Supreme Court came back to the holding in Buckeye in Rent-A-Center v. Jackson [vii]. In that case, the Supreme Court noted that arbitration agreements are equivalent to other forms of contracts and that courts should enforce arbitration agreements according to their terms [viii]. The Court held that only a court’s determination of the enforceability of the arbitration agreement is relevant because of the doctrine of separability, established in Buckeye. [ix] The Court in Rent-a-center added that there are situations when arbitration agreements are assailable, such as when a party challenges the validity under the FAA of the agreement to arbitrate. [x]
The biggest criticism is that the separability doctrine puts potentially void contracts on an arbitrator’s docket. This means that a contract that a court would void, if it has a proper arbitration clause, could still be decided in favor of the defendant in an arbitration hearing. Other criticisms revolve around contract law and defenses to contract enforcement, as well as capacity and forgery issues, which are reserved for the courts. [xi] Some legal scholars even suggest repealing the doctrine of separability, believing that courts should be able to decide the validity of a contract before a contract dispute goes to an arbitrator. [xii]
How this case could affect you
In 2008, Buckeye and the plaintiffs, which are the 14,000 people who received payday loans from Buckeye from 1999-2008, settled for $7M. $1.56M has been set aside for plaintiffs, which means that you could be entitled to cash. How to claim your cash The easiest way to determine if you were part of the class that is entitled to the over $1.5M worth of claims is to contact the attorneys involved in the case. The main law firms involved were Ricci Leopold, Richard Fisher Law Office, Carlton Fields PA, and Squire Sanders LLP. Click the hyperlinks provided to contact these law offices to determine if you are eligible for cash fast!
Overall, the Buckeye decision could have implications for you as a payday loan customer. You could be entitled to a portion of the settlement reached in Buckeye. Anytime you sign up for a payday loan, make sure you read the agreement to make sure that you are not being charged over 45% interest [xiii], which is the legal limit in the state of Florida.
[i]Buckeye Check Cashing, Inc. v. Cardegna , 546 U.S. 440 (2006).
[ii] Gary Born & Claudio Salas, The United States Supreme Court and Class Arbitration: A Tragedy of Errors, 2012 J. DISP. RESOL. 21, n. 145 (2012).
[iii] David Harrison, Appealability of state court’s order or decree compelling or refusing to compel arbitration, 6 A.L.R.4th 652 (n.d.).
[iv]See generally Fla. Stat. § 687 (2009).
[v] 9 USCS § 2 (2013).
[vi]Preston v. Ferrer, 552 U.S. 346 (2008).
[vii]Rent-a-center v. Jackson, 130 S. Ct. 2772 (2010).
[viii]See also Volt Information Science v. Bd. Of Trustees of Leland Stanford Jr. Univ., 489 U.S. 468 (1989).
[ix]See, e.g.,Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967).
[x]See Rent-a-center, supra note vii at 2774.
[xi]See generally Alan Scott Rau, “Separability” in the United States Supreme Court, 2006 STOCKHOLM INT’L ARB. REV. 1 (2007).
[xii] Stephen Ware, Arbitration Law’s Separability Doctrine After Buckeye Check Cashing, Inc. v. Cardegna, 8 NEV. L. J. 107, 121 (2007).
[xiii] Fla. Stat. § 687.071(2) (2009).