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Debtor Sues Instead of Making Loan Payments: Federal Judge Stays Proceedings and Orders Arbitration


Arbitration is a very useful tool that creditors can use to control litigation costs, especially when debtors file frivolous lawsuits. In arbitration, there is limited discovery, cases move quicker, and cases are not heard by a jury, all of which saves the parties time and attorneys’ fees. Arbitration is especially useful in defending frivolous FDCPA cases, which are primarily filed in order to obtain attorneys’ fees and costs.

In Banks v. Cashcall, Inc., the debtor, who made payments on a high-interest loan for over a year-and-a-half, filed a lawsuit alleging that the defendants violated: (1) the Florida Deceptive and Unfair Trade Practices Act; (2) the Florida Consumer Finance Act on excessive interest rates; (3) the Florida Interest, Usury, and Lending Practices Act; (4) the Florida Consumer Collections Practices Act; and (5) the Fair Debt Collections Practices Act. 2016 WL 3021749, *1 (M.D. Fla. 2016).

The defendants filed a motion to compel arbitration pursuant to the arbitration provision in the loan agreement. Id. The plaintiff argued that the arbitration agreement was unenforceable. Id. at *2. The federal judge agreed with the defendants and compelled the parties arbitrate their disputes. Id. at *3.

Arbitration agreements are generally covered by the Federal Arbitration Act. See Caley v. Gulfstream Aerospace Corp., 428 F. 3d 1359, 1366 (11th Cir. 2005)(“The validity of an arbitration agreement is generally governed by the Federal Arbitration Act, 9 U.S.C.§§ 1 et seq. (the “FAA”), which was enacted in 1925 to reverse the longstanding judicial hostility toward arbitration.”).

“The FAA embodies a ‘liberal federal policy favoring arbitration agreements.”’ Hill v. Rent-A-Center, Inc., 398 F. 3d 1286, 1287 (11th Cir. 2005)(quoting Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983)). “ The principal purpose of the FAA is ‘to ensure judicial enforcement of privately made agreements to arbitrate.”’ Holcombe v. DIRECTV, LLC, 2016 F. Supp. 3d, *2 (N.D. Ga. 2016)(quoting Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 219 (1985)).

The federal judge in Cashcall, Inc. was correct in compelling the parties to arbitrate their disputes. Not only did the loan agreement clearly and unequivocally require that the parties arbitrate any dispute(s), but the court was bound by the FAA and case law to grant the defendants’ motion to compel arbitration.

The attorneys at Gill Law Firm have arbitrated cases before various arbitration panels. To find out how Gill Law Firm can help your company collect its receivables, please contact us at: awgill@gillattorneys.com or by phone at (561) 454-0301.

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