When Tiffany Kelly took out a small loan from a payday lending company in Florida, she believed she was dealing with a by-the-books business. Kelly had been turned down for public assistance, and her bank would not lend her any money.

A co-worker told her about McKenzie Check Advance. At the time, Kelly was a 24-year-old single mother and had only a year of college education.

“If it was against the law, McKenzie wouldn’t be allowed to operate,” she said. “At least that’s what I would assume.”

Unfortunately, her assumption was wrong: McKenzie was actually charging its customers interest rates that far exceeded Florida’s laws. When Kelly learned about the lender’s illegal practices she wanted to bring a lawsuit, but McKenzie cited an arbitration clause and class action ban squirreled away in its standard consumer contract.

But that ban violates public policy, an appeals court judge ruled in early 2011. The District Court of Appeals in Palm Beach County, Fla., affirmed a lower court ruling that McKenzie could not escape liability by preventing its customers from bringing a class action.

“The court saw through McKenzie’s attempt to use its fine print contract to give it immunity from the state’s consumer protection laws,” said Public Justice Senior Attorney Paul Bland, who argued the appeal. Bland represented Kelly and a number of other Florida consumers who, despite the purported ban, filed a class action against McKenzie.

“The court sent a clear message,” Bland continued. “Consumers can’t be robbed of their day in court by a sentence buried within an arbitration clause that prohibits class actions in cases where that’s the only way for consumers to obtain any remedy.”

In the trial court, Bland had presented the testimony of several prominent Florida consumer attorneys who testified that it would be “virtually impossible” for an individual to find representation in a payday loan case absent a class action.

In its decision, the District Court of Appeals held that because payday loan cases are complex, time consuming, involve small amounts, and do not guarantee adequate awards of attorney’s fees, individual plaintiffs cannot obtain competent counsel without using a class action. Consequently, the court ruled that McKenzie’s class action ban prevents consumers from vindicating their rights, and thus violates public policy.

Public Justice Goldberg Attorney Amy Radon was the principal author of the appeal brief.