Wisconsin Auto Title Loans, Inc. v. Jones

290 Wis.2d 514, 714 N.W.2d 155 (2006)

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Nature of the Case

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Facts

D, the borrower, obtained an $800 loan from P. They entered into a loan agreement, promissory note, and security agreement providing the borrower an $800 loan. It was a pre-printed standard form short-term loan agreement provided by P. To receive the loan, D had to deliver a security interest in his motor vehicle, a 1992 Infiniti, in the form of a title to P; purchase a $150, one-year membership in Wisconsin Auto Title Loans' 'Continental Car Club'; and pay a $4 filing fee on the motor vehicle title. The loan agreement calls for a single payment of $1,197.08, due on January 3, 2002, which includes the original $800 loan amount, $243.08 of finance charges, and the $154 the borrower borrowed from P to pay P's loan fees. P represents in its loan agreement that the annual percentage rate for the finance charge is 300%. The arbitration provision broadly states that all disputes, controversies, or claims between the parties relating to the loan agreement shall be decided by binding arbitration. The arbitration provision carves out for P the right to enforce D's payment obligations in the event of default by judicial or other process, including self-help repossession. If D initiates arbitration, D must also pay the first $125.00 of the filing fee required by the Arbitration Rules. D made several partial cash payments on the loan, and P served a notice of default on the loan. The amount owing as of April 22, 2002, was $1,509.72. The amount owing as of May 6, 2002, was stated to be $1,627.32. P commenced an action to recover possession of D's 1992 Infiniti. D alleged counterclaims both for himself and as class claims (on behalf of a class of all similarly situated customers of P). The counterclaims assert that P willfully and knowingly conceals consumer loan transaction costs to its customers, imposes loan interest and other finance charges without proper disclosures, engages in collection practices without properly advising its customers of their rights and obligations, and imposes unconscionably exorbitant loan rates and charges, and that the loan agreement was unconscionable under Wis. Stat. § 425.107. D made a jury demand for his counterclaims, and the case was transferred from small claims to the circuit court. P moved to compel arbitration. The circuit court held the arbitration provision unconscionable. The court of appeals granted P's request to appeal the nonfinal order of the circuit court and affirmed the circuit court's order denying P's motion to compel arbitration. P petitioned for review.