Supreme Court of New Jersey
“The provision in this consumer loan contract that forbids class-wide arbitration is unconscionable and thus unenforceable. The appropriate remedy is to sever the unconscionable provision and enforce the remaining valid portions of the arbitration agreement.”
On August 9th, 2006, the Supreme Court of New Jersey upheld arbitration agreements in payday loan contracts but struck down class-wide clauses as unconscionable…
Most payday loan contracts include:
- a class action clause
- a binding arbitration clause
The class action clause usually states that you cannot bring, join or participate in any class action against the payday lender. The arbitration clause states that all claims and disputes will be handled by binding arbitration.
The New Jersey Supreme Court held that:
- the class action clause is unenforceable, but;
- the binding arbitration clause is enforceable
Source: Supreme Court Decisions (Rutgers Camden Law School)
If you would like to learn more about how the binding arbitration clauses in payday loan contracts can affect you, please read Signing Away Legal Protections in the Payday Loan Pitfalls category.
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