Hayes v. County Bank
This is a putative class action by borrowers alleging that a payday lending company violated New York civil rights and usury laws by targeting low-income and predominantly African-American communities for the marketing and issuance of short-term loans with annual interest rates in excess of 900%. A New York state trial court held that the payday lender’s mandatory arbitration clause barring claims for class-wide relief was enforceable, and ordered the plaintiffs to arbitrate their claims. The plaintiffs appealed. On April 27, 2004, we filed an amici brief on behalf of a coalition of public interest groups, arguing that the Federal Arbitration Act (“FAA”) does not preempt New York’s rule allowing direct appeals from orders compelling arbitration, the arbitration clause is unconscionable under New York contract law because it bars claims for class-wide relief, and the FAA does not preempt this application of state contract law. On February 27, 2006, the Appellate Division held the FAA does not preempt New York’s procedural rule allowing the appeal, but that the arbitration clause and its class action prohibition were enforceable under New York law. Michael Quirk and Richard Frankel, both then with Public Justice, wrote the amici brief with input from Public Justice Attorney Paul Bland and co-counsel Deborah Zuckerman of AARP, Russ Hayes of New York Public Interest Research Group, and Rachel Weintraub of Consumer Federation of America.