On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 06-cv-04703) District Judge: Honorable Petrese B. Tucker.
The opinion of the court was delivered by: Sloviter, Circuit Judge
Before: SLOVITER, BARRY, and SILER,*fn1 Circuit Judges.
Appellant asks us to confront what has become a vexing issue in our current economy here and elsewhere -- the extent to which low income borrowers may have access to legal remedies that they waived in a desperate attempt to borrow needed cash. Because many of the lending contracts contain an arbitration provision, there are often issues relating to the permissible scope of the arbitration and the role of the arbitrator. These are the principal issues in the appeal before us. In deciding this appeal, we must balance the rights and legitimate expectations of the parties, but only in terms of deciding whether the arbitration provision should be enforced.
I. The Operative Facts*fn2
The Appellant, Tia Kaneff, is representative of a low income borrower. She separated from her husband in September 2005, and moved into an apartment in Plymouth Meeting, Pennsylvania, with her two children. Plymouth Meeting is approximately 30 miles from the border between Pennsylvania and Delaware. According to the complaint, Kaneff drives a 1994 Buick Park Avenue with 90,000 miles on it that is valued at about $3,000. She works as a Frozen Food Manager at a Giant Supermarket in Plymouth Meeting, Pennsylvania. Her car is her sole means of transportation to her job.
In November 2005, Kaneff realized she would not have enough money to pay rent for December. She tried to get a loan from a bank but was turned down. She then sought a car title loan from appellee Delaware Title Loans, Inc. ("DTL"), which is located in Claymont, Delaware, less than a mile from the border with Pennsylvania.
After driving a short distance to DTL's office, Kaneff sought a loan for $500. To get this amount, Kaneff was first ordered to pay a $5 fee to the Department of Motor Vehicles for recording the lien on her car and a $45 fee to Continental Car Club for an unknown purpose (the contract provides that DTL can retain a portion of these fees, and Kaneff noted in her affidavit that she believed the car club fee was for "the purchase of some sort of insurance"). App. at 50. These fees brought the total amount financed to $550. DTL charged an annual interest rate of 300.01%. The finance charge for the $550 borrowed by Kaneff was $135.62 for the month-long term of the loan, resulting in a total expected payment at the end of the month of $685.62.
Kaneff claims that she did not understand that her loan was only for a month, and instead believed that she would have six months of $136 monthly payments (for a total payoff amount of $816). In fact, that $136 ($135.62) was merely what she owed in interest for one month. Her single payment of $685.62 was due on December 23, 2005. Believing that her total monthly payment was $136, Kaneff paid as follows:
$136 on December 30, 2005 (this first payment was made after the loan was already scheduled to be paid in full)
$145 on February 25, 2006 (made late)
$125.50 on March 31, 2006 (also made late, and for below the payment amount, possibly because she believed it was offset by the prior month)*fn3
In June 2006, the month after Kaneff made the sixth payment, she called DTL to learn what her balance was, and was told she now owed $783. Thus, Kaneff had paid DTL a total of $842.50 within six months of borrowing $550 and was far from finished. Kaneff refused to pay any more, and DTL began calling Kaneff "incessantly, one or more times a day, demanding payment." App. at 53. The company also called Kaneff on her cell phone and at work, despite Kaneff telling them not to do so. Finally, on September 21, 2006, DTL repossessed Kaneff's car. Kaneff received a letter on ...