Zirpoli v. Midland Funding LLC, No. 21-2438 (3d Cir. 2022)Annotate this Case
OneMain, a non-bank finance company, loaned Zirpoli $6,200.08, to be repaid at a rate of 26.91% (total $11,364.35). The loan was issued under the Consumer Discount Company Act (CDCA), a consumer protection statute, which creates an exception to Pennsylvania’s usury law. The loan is governed by a disclosure statement, a security agreement, and an arbitration agreement. Later, OneMain sold delinquent accounts to Midland, including Zirpoli’s loan. Midland sued Zirpoli but later dismissed the suit and undertook collection efforts.
Zirpoli filed a class action, alleging that Midland’s collection activities constituted an unlawful attempt to collect the loan because Midland does not have a CDCA license and never obtained nor requested approval from the Department of Banking. Midland was, therefore, not lawfully permitted to purchase the loan. Midland moved to compel arbitration. The court denied the motion, focusing on the validity of the assignment from OneMain and Midland. The Third Circuit vacated. The ultimate illegality of a contract does not automatically negate the parties’ agreement that an arbitrator should resolve disputes arising from the contract. The parties to the loan clearly agreed to arbitrate the issue of arbitrability. The arbitration agreement provides that an arbitrator shall resolve the arbitrability of defenses to enforcement, including alleged violations of state usury laws.