Fight Against Deceptive Lending in Michigan To Continue

Fight Against Deceptive Lending in Michigan To Continue

Motion for arbitration denied; Plaintiffs paid exorbitant interest due to hidden provision

Thomas Hawk via photopin cc

By Aidan O’Shea

Communications Specialist

When Eboree Larkin, a 25-year-old single mother, accepted a 25 percent Annual Percentage Rate on her used-car payments, she expected the APR to be just that: 25 percent. But she, among many other car buyers in Michigan, was a victim of a deceptive and illegal lending practice at the hands of Rightway Automotive Credit: a hidden “discount fee” that had the effect of making the rate illegally high, say the plaintiffs in the Larkin v. New Century case.

The discount fee is what Rightway Automotive owed to the finance company to secure Larkin’s contract. Rightway did not simply pay this fee and absorb that cost across the entirety of its business. Instead, it passed that charge directly on to Larkin, making the effective rate of interest on her car payments well above the 25 percent to which she agreed, and which is the highest rate allowable under Michigan law. And she wasn’t alone.

Larkin filed suit against Rightway’s parent company, New Century, on her behalf and that of a group of Michiganders who had been subject to this “discount fee” in previous years. The plaintiffs allege that Rightway concealed this fee from consumers, and that the fee led to illegally exorbitant payments. The plaintiffs also said that these actions were carried out as part of a written policy, in violation of a number of Michigan laws.

Public Justice was part of this effort to ensure this essential consumer-protection case proceeded to trial. This is despite a defense motion for the suit to be dismissed from court and proceed in arbitration, a process which is inherently favorable to corporations because they are able to choose the company that picks the arbitrator. Rightway claimed that the arbitration agreement the plaintiffs signed included a ban on class action lawsuits.

The United States District Court, Eastern District of Michigan, dismissed Rightway’s motion for arbitration on the grounds that the arbitration agreement signed by Eboree Larkin and her co-plaintiffs never formed an enforceable agreement, because it violated Michigan’s Single Document Rule for Retail Installment Sales Contracts. Bland was part of the team that fought the motion for arbitration, and regards that dismissal as an affirmation of basic consumer rights.

“In this case, as in similar ones, the defendants have attempted to hide behind forced arbitration in order to continue an unjust practice. The document containing the arbitration agreement on which Rightway’s motion rested was in clear violation of Michigan consumer law.”

Despite Rightway’s efforts to use a forced arbitration clause to allow its institutionalized practice to continue, Eboree Larkin and her co-plaintiffs will have their day in court.

Larkin is an important reminder of how forced arbitration serves as a license for mistreating and deceiving customers, Bland said.

“With Rightway’s desperate attempt to invoke it denied, the Plaintiffs are proceeding with their fight to uphold a basic principle of fairness: companies should honestly represent what the real interest rate is to consumers.”

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