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« Class action waiver unconscionable in consumer contract | Main | Arbitration Lesson #7 - Voluntary agreement »

Consumer can't be forced to pay for arbitration
August 09, 2006 by Ross Runkel at LawMemo

A consumer mortgage loan contract has an arbitration clause. That clause will be unconscionable if:

  • It requires the consumer to pay the costs of arbitration.
  • It strips the arbitrator of power to award attorney fees and costs to the prevailing party.
  • It requires that a party who appeals from the arbitration must bear the costs of the appeal "regardless of the outcome of the appeal."

So says the New Jersey Supreme Court today in Delta Funding Corp v. Harris (New Jersey 08/09/2006).

These provisions can be severed from the agreement, and the agreement can be enforced without them.

On another point [see Class action waiver unconscionable in consumer contract] the court found that an anti-class-action clause would not be unconscionable because the case involved a substantial amount of damages and that would give the plaintiff enough incentive to bring the claim as an individual action.

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