One of several putative class actions against payday lenders, who are operating without proper licenses in North Carolina, to recover illegal and exorbitant interest charges. The defendants in all three cases moved to compel arbitration and to dismiss the claims against various individual defendants on grounds of personal jurisdiction.  The trial court granted the defendants’ motions and denied class certification.  These three appeals were argued in the Court of Appeals on January 9, 2007, with Paul Bland and Jerry Hartzell splitting the argument.

All three of the payday lenders have attempted to justify their refusal to comply with state law by engaging in “rent-a-charter” operations with national banks, then arguing that the National Bank Act preempts any state laws that would otherwise apply.  The national bank that Advance America has used as a shield, Republic Bank, filed a declaratory judgment action against our clients in federal court asking that court to require our clients to individually arbitrate their claims against Republic Bank.  The district court dismissed Republic Bank’s case on the ground that Republic Bank, as a non-party to the underlying action, lacked standing to seek a declaratory judgment.  Republic Bank has appealed that decision to the Fourth Circuit.

In January 2007, the Fourth Circuit stayed the Republic Bank case, pending the outcome in another case, Vaden v. Discover Bank, that poses similar issues.  On January 30, 2007, Public Justice and our co-counsel filed an amicus brief with the Fourth Circuit arguing that the court should adopt our legal position in the related case.  Other banks have brought similar declaratory judgment actions against our clients in the Hager and Knox cases. Public Justice’s Paul Bland and Leslie Bailey have been be working on the arbitration issue.  Our other co-counsel include Public Justice Foundation officer Mona Wallace of Wallace and Graham and John Hughes of Wallace and Graham; Carlene McNulty of the North Carolina Justice Center; Mal Maynard of the Financial Protection Center in North Carolina; Jerry Hartzell of Hartzell & Whiteman in North Carolina; Richard Fisher of Cleveland, Tennessee; and Steve Gardner of Dallas, Texas.  Former Public Justice Fellow Rich Frankel has continued to do extensive work in the cases.

Briefs and Documents

Decision by N.C. State trial court that a payday lender's arbitration clause, which contained a term banning class actions, was unconscionable and unenforceable because it would prevent the consumers from enforcing their rights under NC's consumer protection and small lending statutes. 

Order on Motion for Class Certification (June 26, 2009)