Nature of the Case
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Facts
P is in the business of extending high-risk loans to customers with poor credit ratings. It operates primarily in Louisiana, Mississippi, and Missouri. Ds, who reside in Waldo, Arkansas, obtained four loans over a two-year period from D at its location in Springhill, Louisiana, which is near the Arkansas-Louisiana border. On May 13, 2009, they borrowed $1,580.36 with an annual interest rate of 40.20 percent. Ds received $1,031.63 in cash. The finance charge amounted to $811.64, yielding a total indebtedness of $2,392, payable in twenty-six monthly installments of $92. The loan was secured by 'personal property.' On December 17, 2009, Ds obtained another loan of $20,887.71 at an annual interest rate of 24.09 percent. P satisfied the first loan and paid both a hospital bill owed by Ds and their delinquent property taxes. After deducting those sums and $850 in fees, they received $17,388.32. With the finance charge of $18,784.29, the Brantleys were to pay a total of $39,672 over the course of seventy-two months at the rate of $551 per month. Ds executed a mortgage on their home in Waldo. Gulfco appraised the value of the home at $32,000 with a quick-sale value of $27,000. On June 2, 2010, P loaned Ds an additional $2,779.82. P charged an annual interest rate of 35.67 percent, and after deductions for fees and prepaid interest, the Brantleys received $2,501.83. Adding the finance charge of $1,250.18, the total debt amounted to $4,030 to be satisfied in twenty-six monthly installments of $155. This loan was secured by a list of personal property that included a riding lawn mower, a drill, a chainsaw, televisions, and cameras. On March 11, 2011, Ds borrowed an additional $3,345.34 with interest at 34.32 percent. Gulfco charged $400.72 in fees, and the proceeds were used to retire the June-2010 note. After these deductions, the Brantleys received cash in hand of $598.71. Including the finance charge of $1,464.66, they were obligated to pay $4,810 over twenty-six months at the rate of $185 per month. This note was secured by the same personal property as the June-2010 loan. Ds made no payments after March 31, 2011. P filed to sell Ds' home. Pamela (D) filed a pro se answer that was followed by a response filed by Ds' attorney. Ds asserted the defenses of usury, unconscionability, estoppel, illegality, unclean hands, predatory lending practices, and a violation of the Arkansas Deceptive Trade Practices Act (ADTPA). Ds filed a petition for a preliminary injunction asserting in part that the promissory notes were unconscionable, as Gulfco took advantage of their lack of sophistication and induced them to mortgage their home with the knowledge that they did not have stable, full-time employment. D worked part-time for a moving company. He learned about Gulfco through a friend and that he and Pamela took out the first loan to pay personal bills that were about to become delinquent. They fell behind because work was slow and Pamela fell ill. P suggested that they take out a second loan. P already had the papers prepared when he arrived at the office. D stated that he did not read well and that he read what he could of the loan disclosure statement and promissory note. The money for the second loan was used to pay the first note and to buy a logging truck. D purchased the truck for $1,500 and spent $2,300 for welding in addition to buying tires and paying insurance. The June-2010 loan was used to catch up on the arrearages on the December-2009 loan. Ds borrowed more money in March 2011 to again bring their loans current. Pamela said they told the loan agent, Demetrius Wilson, that she earned $120 per week sitting for an elderly woman and that D worked part-time for a moving company and sometimes mowed yards. They advised P of her medical problems. P knew that they had a home and about D's idea of obtaining a logging truck as a means to generate income. They advised P that they were having a hard time making their payments on the first loan and that it was P who suggested mortgaging their house and purchasing a logging truck. The logging truck did not work out due to problems keeping the truck running, the high cost of gasoline, and a downturn in the logging business. The circuit court described what it referred to as a 'disturbing pattern of lending.' The court found that 'the loans constituted predatory lending by a foreign corporation not authorized to do business in Arkansas and that the contract sought to be enforced is unconscionable and cannot be given full faith and credit. The court refused enforcement of the contracts. P appealed.
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