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Arbitration Clause That Violates Protections Provided by TILA Not Enforceable
Description An appeals court held that a mandatory arbitration clause in a consumer finance contract covered by the Truth in Lending Act could not be enforced because the finance contract did not allow the statutory protections provided for the consumer by the Act.
Topic Consumer Protection
Key Words Truth in Lending; Arbitration Clause
C A S E   S U M M A R Y
Facts Randolph bought a mobile home that was financed by Green Tree Financial. The finance agreement contained an arbitration clause. Randolph sued in federal court, contending that Green Tree's financing documents violate the Truth in Lending Act and that the Act precludes arbitration that arises under TILA. District court ordered arbitration; Randolph appealed.
Decision Reversed. The arbitration clause in the finance agreement failed to provide the minimum guarantees required to ensure that a debtor could use the statutory rights provided by TILA and so the arbitration clause was unenforceable. When an arbitration clause has provisions that defeat the remedial purpose of a statute such as TILA, the clause is not enforceable.
Citation Randolph v. Green Tree Financial Corp., 178 F.3d 1149 (11th Cir., 1999)

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