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"Taking It Back"

People can fight car loan repossessions in court

TODD RICHMOND, Associated Press

MADISON, Wis. - A car title loan company can't force a customer to fight repossession through arbitration rather than through the court system, a state appeals court ruled Thursday.

The 4th District Court of Appeals ruled a section of Wisconsin Auto Title Loans Inc.'s contract with Kenneth M. Jones is unreasonable and unenforceable because it would force him to settle disputes with the company through arbitration.

The ruling upheld a decision by Milwaukee County Circuit Judge Michael Guolee.

Jones' attorney, James Walrath, issued a statement praising the decision, saying payday lenders that charge large amounts of interest use arbitration clauses to prevent customers from attacking their business practices in court.

"Today the consumer won," Walrath said.

Wisconsin Auto's attorney, Kenneth Nowakowski, didn't return a message The Associated Press left at his office Thursday.

According to the ruling, Jones was unemployed when he borrowed $800 from Wisconsin Auto to pay his bills in 2001. He agreed to a contract that said he must repay the company at 300 percent interest and settle any disputes with the company through arbitration.

Jones defaulted on the loan. The company filed a complaint in court to seize Jones' car, as required by Wisconsin law.

Jones filed counterclaims. The company made a motion to settle the counterclaims in arbitration, pursuant to the contract. But Guolee ruled the contract was unreasonable because it was too one-sided - the company could pursue actions in court, but Jones could not.

Wisconsin Auto argued on appeal that state law forces it to bring the repossession action in court, but that doesn't mean Jones can skip arbitration.

But the appeals court agreed with Guolee, saying the contract created an unfair advantage for the company.

"Jones is required to arbitrate all claims and disputes arising out of the (contract) while Wisconsin Auto remains free to enforce its rights to repayment of the debt ... in the circuit court," the court's ruling said.

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