In Jackson v. Payday Financial, LLC, No. 12-2617 (7th Cir. Aug. 22, 2014) (click here to see a copy of the decision), the plaintiffs filed a lawsuit against various entities involved in payday lending, alleging violations of usury statutes. The loan documents at issue contained clauses providing for arbitration before a tribal elder or council of the Cheyenne River Sioux Tribe.
The Seventh Circuit found that the arbitration agreement was illusory since the tribal leaders had no experience with arbitration, and the tribe had no arbitration rules. The Seventh Circuit found that the dispute resolution mechanism set forth in the agreement was a sham and did not exist, and as a result, the arbitration agreement was not enforceable.