Positive ruling late last week from New Mexico Supreme Court
By Amy Radon, Goldberg Attorney
By now you’ve probably seen the decision that was handed down last week in the Felts case. The New Mexico Supreme Court ruled that two Internet payday lenders can’t force our client into arbitration.
Andrea Felts, a high school administrator, originally brought her suit against the lenders because they were harassing her for interest payments she couldn’t afford. The interest rates on her three loans were eye-popping: 521, 684 and 730 percent.
Like countless other consumers, she was unaware that the lenders included in their contracts a forced arbitration clause as a condition of obtaining a loan. Nevertheless, the lenders tried to use that clause to get her lawsuit thrown out of court. Now, Felts v. CLK Management will be able to proceed as a class action. (Many other payday loan customers in New Mexico were also charged illegally high interest rates by these lenders.)
Let’s break down yesterday’s ruling a bit: the arbitration clause here was particularly bad for New Mexico’s consumers because, in addition to banning class actions, it also required that all disputes be decided by the National Arbitration Forum. We urged the court to hold the clause unenforceable on the grounds that: (1) the NAF no longer handles consumer arbitrations (it was forced to stop after a corruption scandal); and (2) because the designation of the NAF was an integral feature of the arbitration clause, the court should not appoint a substitute arbitrator.
New Mexico’s high court agreed with our arguments, holding the arbitration clause unenforceable. The case has now been remanded to the district court, so we’ll keep you posted on where it goes from here.