Court Holds That Loan Refinancing Obviated Enforceability Of Arbitration Provision In Original Loans

In Sanh v. Opportunity Financial, LLC, a Washington District Court rejected a lender’s assertion that claims of usurious conduct brought by a borrower should be arbitrated under terms of the loan agreement. As the court explained,

Between April and August 2019, plaintiff entered into three loan agreements with FinWise
Bank C/O Opportunity Financial, LLC. Each successive loan paid the outstanding balance on the previous loan and provided a few hundred dollars directly to plaintiff. All three loan agreements contained an “Arbitration Clause” consisting of a series of questions and answers describing arbitration, its procedures, and its limitations. The clause governs all “claims, ” which is defined to have “the broadest reasonable meaning” and includes “all claims even indirectly related to your application, the loan, this Note and your agreements with us. . . . It includes all past agreements. It includes extensions, renewals, refinancings or payment plans.” … “Us, ” for purposes of the promise to arbitrate, includes FinWise’s successors, assigns, and related third-parties “who have provided services in connection with any loan to you, including [Opportunity Financial].” Id. The arbitration provision also includes a notice and cure requirement … and an opt-out provision … Plaintiff timely notified FinWise that she was opting out of the arbitration provision contained in the third loan agreement.

The lender argued that, notwithstanding plaintiff’s exercise of the opt-out in the third refinance, arbitration remained appropriate “because the parties did not ‘sign an agreement stating it doesn’t’ and because the arbitration clause states that it covers refinancings and will remain in effect regardless of prepayment, performance, or amendment.”

The court disagree, however, holding that the parties “entered into a series of loan documents, each declaring itself to be the complete expression of the parties’ agreement and containing an arbitration clause that applied to all claims, past and future. The claims covered by the third arbitration clause specifically included ‘all past agreements.’ Her previous promises to arbitrate were therefore superceded by the third arbitration clause, from which plaintiff timely and effectively opted out.”

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