Appellant E-Z Cash Advance, Inc., appeals the order of the Pulaski County Circuit Court denying its motion to compel arbitration. For reversal, E-Z Cash argues that a contract signed by Appellee Deborah Harris contained a valid arbitration clause, thus preventing her from filing suit in circuit court. We disagree, and thus, affirm.
E-Z Cash is a corporation that is in the business of providing cash loans to individuals who present personal checks that are held until the borrower’s next payday. These transactions are commonly referred to as “payday loans.” In , Harris presented E-Z Cash with a personal check in the amount of $400 that it agreed to hold until Harris’s next payday. Harris was then required to return to E-Z Cash to either redeem the loan for the full face amount of the check or to renew the loan. She decided to renew the loan by paying the interest and presenting a new check for the original amount of the cash received, plus an additional service charge for the extended term. As part of the transaction, Harris signed an “Arkansas Deferred Presentment Agreement,” stating that there was a check cashing fee of $40, as well as a $10 deferred presentment fee. This form also stated that the $50 constituted a finance charge, with an annual percentage rate of 372.4 percent. Thereafter, Harris received $350 in cash. Harris continued this arrangement with E-Z Cash until .
After Harris encountered difficulties repaying the interest due on her loans, she filed suit, individually and on behalf of similarly situated persons, against E-Z Cash. In her complaint, Harris alleged that E-Z Cash violated Article 19, § 13, of the Arkansas Constitution by charging interest in an amount exceeding the maximum allowable rate. Specifically, Harris averred that the “service charge” imposed by E-Z Cash amounts to interest, as the term is used in Section 13, and the annual interest rates range anywhere from 300 to 720 percent, thus violating Arkansas’s constitutional prohibition against usury. Harris requested that she be appointed as a representative of the class and prayed for judgment in an amount equal to twice the interest paid by each member of the class, costs, and attorney’s fees. Harris also requested that the court declare the contracts at issue null and void.
E-Z Cash responded with a motion to dismiss Harris’s suit on the ground that Harris signed a valid arbitration agreement and was thus barred from bringing suit in circuit court. In her response to the motion to dismiss, Harris contended that the circuit court should follow the reasoning of other jurisdictions that have refused to compel arbitration, particularly in situations involving payday loan transactions where the underlying loan transactions are illegal or unenforceable. E-Z Cash then filed a motion to compel arbitration. Harris responded that the contracts are void ab initio and are therefore invalid, and as such, a void contract may not be arbitrated.
This appeal stems from a dispute regarding the legality of certain loan transactions involving E-Z Cash and Harris
The trial court held a hearing on the motion to compel on . No witnesses testified, but attorneys representing both parties presented their arguments to the court. The trial court orally denied the motion to compel, stating from the bench:
I’ve got to deny it, of course. I mean I’ve read the contract and it’s almost like an adhesion clause. Plus, there’s, of course, similar cases on this.
This is a one-sided contract in regard to arbitration. I don’t see any other way to read it. There’s no obligation on behalf of check cashiers to do anything but sue them.