Lending Agreements’ Out-of-State Forum Selection Clauses and Class Action Waivers Violate Georgia Public Policy We We We Blog 11thCircuitBusinessBlog

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Lending Agreements’ Out-of-State Forum Selection Clauses and Class Action Waivers Violate Georgia Public Policy We We We Blog 11thCircuitBusinessBlog

Loan providers had been banned from enforcing out-of-state forum selection clauses and class action waivers in loan agreements because such conditions violate Georgia’s general general general public policy, the Eleventh Circuit held in Davis v. Oasis Legal Finance working Co., 2019 WL 4051592 (11th Cir. Aug. 28, 2019). A course of borrowers whom joined into identical loan agreements sued their loan providers, alleging that the agreements violated Georgia’s Payday Lending Act, O.C.G.A. 16-17-1 et seq., Industrial Loan Act, O.C.G.A. 7-3-1 et seq., and usury rules, O.C.G.A. 7-4-18. The lenders relocated to dismiss the issue and hit the borrowers allegations that are’ class arguing that the mortgage agreements’ forum selection clauses needed the borrowers to sue them in Illinois and therefore the course action waivers banned a course action. Siding using the borrowers, the region court denied the lenders’ motions, keeping that both clauses violated Georgia’s policy that is public had been unenforceable.

The Eleventh Circuit affirmed on interlocutory appeal and in an opinion by Judge Adalberto Jordan. When it comes to forum selection clause, the court reasoned that in accordance with Georgia Supreme Court precedent, the Payday Lending Act establishes a clear public policy that prohibits loan providers from making use of out-of-state forum selection clauses: the Act expressly bars loan providers from designating a court when it comes to quality of disputes “other than the usual court of competent jurisdiction in and also for the county when the debtor resides or perhaps the loan office is located.” Further, the statute describes that loan providers had utilized forum selection clauses to prevent Georgia courts and that “the General Assembly has determined that such methods are unconscionable and really should be forbidden.”

Lenders argued that the Payday Lending Act might be interpreted to allow non-Georgia forum selection clauses as the Act failed to require disputes to specifically be earned a Georgia county

it just provided disputes must certanly be solved in a “county when the debtor resides or perhaps the mortgage workplace is found.” (emphasis included). The court disposed for this argument, reasoning that Georgia location conditions usually utilize the term that is general” whenever discussing Georgia counties. And also the lenders’ argument made sense that is little from the Act’s clear prohibition on out-of-state forum selection clauses.

For many reasons, the court additionally rejected the lenders’ argument that the Payday Lending Act will not affect loans by out-of-state loan providers. First, the Georgia Supreme Court has recently refused this argument. 2nd, the statute broadly is applicable to “any business” that “consists in entire or in element of making . . . loans of $3,000.00 or less.” Third, if this argument held water, it could make the Act’s prohibition on out-of-state forum selection clauses meaningless.

Upcoming, the court addressed the class action waiver. It consented with all the region court’s summary that the Georgia Legislature meant to protect course actions as a fix against payday lenders—both statutes expressly allow course actions. Enforcing the course action waiver would undermine the point and character of Georgia’s scheme that is statutory. This, alone, was enough to make the course action waiver unenforceable under Georgia legislation.

So as to persuade the court otherwise, lenders pointed to prior Eleventh Circuit cases—Jenkins v. First American Cash Advance of Georgia, LLC, 400 F.3d 868 (11th Cir. 2005), and Bowen v. First Family Financial Services, Inc., 233 F.3d 1331 (11th Cir. 2000)—which held that class action waivers in arbitration clauses weren’t void as against general general public policy. The court had not payday loans no credit checks been convinced, emphasizing that Jenkins and Bowen involved class action waivers in arbitration agreements. Consequently, the Federal Arbitration Act used and created a stronger federal policy in benefit of arbitration. Furthermore, Supreme Court precedent establishes that area 2 of this Federal Arbitration Act overrides a continuing state statute or common-law doctrine that efforts to undercut the enforceability of an arbitration contract. Because an arbitration contract had not been at issue here, the court explained, Jenkins and Bowen are distinguishable in addition to Federal Arbitration Act does not use.