Green Tree Financial Corp. won a case involving the soliciting of a high-rate home-improvement loan this month, but in another court battle last month lost the case over the same issue.
The borrowers in the most recent case claimed that they were victims of a scheme in which home improvement contractors conspired with a subprime lender to solicit high-rate second mortgages to finance sub-standard home improvements, according to attorneys at law firm Hoar Phrophet.
The borrowers in both cases argued that an arbitration clause in their home-improvement loan paperwork was buried in fine print, and did not clearly state that upon signing the documents a borrower was relinquishing his rights to a jury in favor of submitting to arbitration any disputes the borrower has with the lender.
The United States Appeals Court for the Third Circuit found in the July case that the agreement was only one page, negating the claim that the arbitration clause was buried.
The court also cited precedent favoring the arbitration clause in the decision that favored Green Tree.
But in June, the 11th Circuit U.S. District Court found the same clause unenforceable and unconscionable.
The verdicts, which were handed down in federal courts in Atlanta and Philadelphia, further cloud the legality of arbitration provisions used more frequently these days by companies.