Payday Loan Customers Ask Texas Supreme Court to Consider Individual Arbitration Order

A group of payday loan customers has asked the Supreme Court of Texas to intervene after the Fourth Court of Appeals in San Antonio ordered the putative class to individually arbitrate their claims against a payday lender that filed criminal complaints against its defaulting customers.  In Henry v. Cash Biz, LP, No. 16-0854, payday lender Cash Biz provided short-term loans to individuals in exchange for a fee that was paid upfront using post-dated checks.  As part of the company’s agreement to do provide the loans, customers were required to sign a credit service contract that contained an arbitration clause and class action waiver.

In January 2015, a group of customers accused Cash Biz of engaging in “malicious prosecution, fraud, violation of the DTPA, and violation of Finance Code Section 393.301” after the company began contacting the local district attorney’s office seeking to file criminal complaints against defaulting payday loan customers based on checks that were returned for insufficient funds.   In response to the lawsuit, Cash Biz filed a motion to compel the customers’ claims to individual arbitration.  A Bexar County trial court declined to compel arbitration, but the Fourth District Court of Appeals reversed the lower court’s order.  You can read more about the history of the case in a prior blog post.

Last week, the customers filed a Petition for Review with the Texas high court.  According to the putative class, Cash Biz substantially invoked the judicial process when the company illegally filed criminal charges against more than 600 customers.  The class also claims the company used the arbitration clause included in the credit service agreement to try to avoid being punished for its illegal behavior.  As a result, the customers asked the Supreme Court of Texas to stop their claims from being arbitrated individually.

The issues presented in the Petition for Review are:

Issue 1: Majority opinion failed to apply abuse of discretion standard to trial court’s factual determination and failed to consider most of the evidence presented, without objection.

Issue 2: Majority opinion failed to apply FAA or federal law as required

Issue 3: Petition for Review is necessary to correct split of authority

Texas Appleseed has filed an Amicus Brief of in support of the customer’s Petition for Review.

Please stay tuned for future developments in this case!

Photo credit: Jonathan Rolande via Foter.com / CC BY