Loan repossessions in court
A car title loan company can't force
a customer to fight repossession through arbitration rather than through
the court system, a state appeals court ruled Thursday.
The 4th District Court of Appeals ruled a section of Wisconsin Auto Title
Loans Inc.'s contract with Kenneth M. Jones is unreasonable and
unenforceable because it would force him to settle disputes with the
company through arbitration.
The ruling upheld a decision by Milwaukee County Circuit Judge Michael
Jones' attorney, James Walrath, issued a statement praising the decision,
saying payday lenders that charge large amounts of interest use
arbitration clauses to prevent customers from attacking their business
practices in court.
"Today the consumer won," Walrath said.
Wisconsin Auto's attorney, Kenneth Nowakowski, didn't return a message The
Associated Press left at his office Thursday.
According to the ruling, Jones was unemployed when he borrowed $800 from
Wisconsin Auto to pay his bills in 2001. He agreed to a contract that said
he must repay the company at 300 percent interest and settle any disputes
with the company through arbitration.
Jones defaulted on the loan. The company filed a complaint in court to
seize Jones' car, as required by Wisconsin law.
Jones filed counterclaims. The company made a motion to settle the
counterclaims in arbitration, pursuant to the contract. But Guolee ruled
the contract was unreasonable because it was too one-sided - the company
could pursue actions in court, but Jones could not.
Wisconsin Auto argued on appeal that state law forces it to bring the
repossession action in court, but that doesn't mean Jones can skip
But the appeals court agreed with Guolee, saying the contract created an
unfair advantage for the company.
"Jones is required to arbitrate all claims and disputes arising out of the
(contract) while Wisconsin Auto remains free to enforce its rights to
repayment of the debt ... in the circuit court," the court's ruling said.
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