Payday Loan, Title Loan & Consumer Loan Affiliate Programs: Making Big Bucks on the Internet

How to Start a Consumer Loan Business: Installment lending, car title loan lending, payday loan lending, personal loan business

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The Business of Lending Money to the Masses: Installment lending, car title loan lending, payday loans, line-of-credit lending… So, I get a phone call today from some guy in Denver. He tells me his name is Leo. Leo is interested in setting up a web site business to sell payday loan leads, car title loan leads, personal loan leads, installment loan leads and loan applications. Leo explains that he really doesn’t have the cash to actually “fund”  loans at the present time but he does want to enter the consumer loan space, get familiar with the business of lending money to consumers, and start off making money by joining an affiliate program.

Consumer loan affiliate programs

What? You don’t know what a consumer affiliate program is? No problem! Affiliate Marketing is an Internet-based marketing practice in which a business, often called a merchant, rewards their affiliates, often called partners, for each visitor or customer brought to the business or merchant’s web site by the affiliate’s marketing efforts.

For example, let’s say ZeroParallel, a payday loan and consumer loan lead generator company has an affiliate program. They are willing to pay those of us having consumer loan oriented web sites to “feed” visitors from our lead gen web site to the ZeroParallel web site. For each web site visitor we send to, we are paid an affiliate commission. The fees we earn as the web site owner can be structured many ways. Typically, for payday loan leads, we might be paid $3 – $150 for each application actually submitted by our web site visitors “fed” to the ZeroParallel website. And, if ZeroParallel actually funds the applicant or sells the lead we might be paid an additional $20+ each!

So… if we set up a very basic web site and are capable of sending hundreds or thousands of our web site visitors to the ZeroParallel web site we could earn thousands of dollars every month while we lounge in our underwear!

Did you know that the search term “payday loan” was searched on more than 1,000,000 times just last month! “Fast cash loan” was searched 210M times last month! And that’s just Let’s not forget Bing, Yahoo and all the other search engines out there. That’s a LOT of people wanting to get a consumer loan last month!

Now, the key to getting paid for all these  loan customers sent to ZeroParallel’s web site is to be able to accurately track these visitors and their actions! Today, this is easy! And better, it’s FREE! There are companies that can track all this data and transactions for you! And they charge you, the Affiliate Nothing! Zero! Nada! No cost to the affiliate! They get their fees from the ZeroParallel’s of the world; the consumer loan funding companies that are willing to pay for loan applications so they can fund the loans.

By the way, this is a great way to enter the consumer lending space without having to spend thousands of dollars. After all, you don’t have to immediately begin funding consumer loans. And just like insurance applications or mortgage applications, consumer loan applications submitted by real, live, breathing loan customers are extremely valuable!

Think about it!

A typical consumer loan customer who applies for and receives 3 payday loans per year for ten years is worth a minimum of $2400.
(Conservatively, a payday loan customer gets 3 ea $400 payday loans at $20/$100 loaned = $80 in fees per loan X 3 times/yr = $240/yr X 10 years = $2400 life time value. [Actually, in regards to payday loan borrowers, the average is 6 loans per year. Installment loan borrowers generally have much higher loan principals spread out over 6 months+.]

Add on late fees, their family and friend referrals, etc. and each customer is worth $3000 or more AT A MINIMUM!)

So… in the case of the payday loan product for example, why wouldn’t a payday loan merchant be happy to pay $55 or more to you, a payday loan oriented web site owner for a good customer? Of course they would beg you to take their cash! They would see this transaction as a trade of $55 for $3000 over 10 years! And probably much more since the new, happy customer you just sent from your web site to the payday loan merchant has friends and family they will refer; at $3000 per head!

This strategy works for all kinds of consumer loans. Payday loans [single payment loans], installment loans, car title loans, personal loans… doesn’t matter!

All for a one-time payment to you for $55!

And by the way. If you can learn to do this in the payday loan industry do you think you could do it in other industries as well?

Maybe loan modifications? Long term care insurance leads? Car loans? Mortgages? Refi’s? What industry or niche do you currently have knowledge about? Does this niche need more customers?

HELL YEAH! Who doesn’t need more customers today?

What do you need to get started? KNOWLEDGE! Where can you get it? Simply “Google” the search phrase: fill in the blank _____. For example, “Payday loan affiliate program.” Visit Commission Invest some time learning about this opportunity and then TAKE ACTION. Rinse! Repeat!

Shameless plug… Order our “The Business of Lending Money to the Masses” here: We discuss all aspects of making money in the payday loan space. Installment loans, line of credit lending, payday loans, car title loans… Everything you need to know, from choosing a domain name, selecting a web site hosting company, getting a web site built easily and at a cost of $0 to $250 depending on how much you’re willing to do yourself, how to rank well in search engines, how to find a good, free affiliate program, how to find an affiliate management company to keep your statistics and make certain you get paid like clockwork every month for your leads, and MUCH, MUCH MORE!

So, if the thought of making significant money, on automatic pilot excites you, head over to: and invest in yourself and our “Make Money Lending Money Bible”

It’s all laid out for you!

What our “Business of Lending Money to the Masses” Course does is teach you step-by-step how to use the Internet to make money in the consumer loan niche. We can set you free from being one of the “clueless mob” of entrepreneurs and small business owners out there…

… and deliver to you –  on a silver platter –  the missing link to finally being one of the few “clued in” Internet marketers…

… for whom Internet money making success is simply the systematic application of a few obvious steps.

The keywords to consider are: “SIMPLE” – “SYSTEM” – “OBVIOUS.”

One last thought… we don’t want you to think this system requires no effort on your part. You’re going to have to work! There’s a lot to learn. Using the Internet to make significant money is certainly something you can achieve BUT you’ll have to study our material and DO IT! You’ll have to take action!! This can hurt. You’ll be faced with making a choice between watching a great movie on your large screen TV or studying our Course to learn how to drive more payday loan customers to your new web site to make more money.

Is it worth it to you, all this pain? We think not taking action is even more painful. Because, if you follow the crowd and continue to sit back and consume rather than learn to create, you’re going to be sitting in the same exact spot you are now:


How does this feel? Does it hurt? Do you feel the pain? Do you want to make it go away? Yes? Then pay the price and change your life! And, if our system doesn’t grab you, PLEASE find something that does and take a new path all the way to achieve success for YOU!

Order our “The Business of Lending Money to the Masses here:


More consumer loan affiliate programs in no particular order. DO YOUR DUE DILIGENCE! & the Team at Trihouse Payday Loans
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How to Start a Consumer Loan Business: Installment lending, car title loan lending, payday loan lending, personal loan business

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Payday Loans, Government Subsidies and the FDIC’s Small-Dollar Loan Pilot Program

What a joke! The FDIC’s Small-Dollar Loan Pilot Program!

First they state, “It’s a two year study to illustrate how banks
can profitably offer affordable small dollar loans as an
alternative to high-cost credit products, such as payday loans and
fee-based overdraft protection.”

In the next paragraph they write, “Only a few participating banks
have indicated that short-term profitability is the primary goal for
their small-dollar loan programs.”

“Only a few participating banks have indicated that short-term
profitability is the primary goal for their small-dollar loan
programs. Rather, most pilot banks are using the small-dollar loan
product as a cornerstone for long-term relationship-building that
also creates good-will in the community. Moreover, a few banks’
business models focus exclusively on building goodwill and generating
an opportunity for positive Community Reinvestment Act (CRA)

“Regardless of business model, all of the banks have indicated that
small-dollar lending is something they believe they should be doing
to serve their communities.”

So… in other words if the banks in the study didn’t have to deal
with the CRA or have the possibility of feeding these small-dollar
customers to the bank’s over-draft fees and NSF fees products they
would not touch these customers. “There is no profit in actual
small-dollar loans for them!”

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The FDIC Small-Loan Pilot Program featured the following:
The primary loan product features described in the SDL Guidelines
include the following:

– Loan amounts up to $1,000

– Payment periods beyond a single paycheck cycle

– Annual percentage rates (APRs) below 36 percent

– Low or no origination fees

– Streamlined underwriting

– Prompt loan application processing

– Automatic savings component

– Access to financial education

In addition, while several participating banks require automatic
savings linked to small-­dollar loans, others encourage but do not
require savings.

They go on to say, “Given the small size of SDLs (Small Dollar
Loans) and to a lesser extent, NSDLs (Non-Small Dollar Loans), the
interest income and fees generated are often not sufficient to achieve
short-term profitability. Nevertheless, banks with existing programs
have been able to generate long-term profitability through volume and
by using the SDL and NSDL products to cross-sell additional products.”

The above statement makes a lot of sense – NOT! “The interest
income and fees generated are not sufficient to achieve short-term
profitability… banks have been able to generate long-term profitability
through volume…”

So, I guess that means if I sell loaves of bread at $1.00 each and
each loaf costs me $1.50 each I’ll achieve long-term profitability
by increasing my bread loaf sales volume? No, that can’t be right!
Oh wait! I get it. If I received a bank charter from the government
and in order to continue to receive low interest rate government
money I must keep my local consumer protectionist (CRL) off my butt
then I’ll lose money on every loaf of bread BUT long-term I’ll move my
bread customers to my higher priced cup cakes (over draft fees and
NSF fees).

Or, maybe my strategy is to sell my bread loaves at a loss until all
my bread competitors are gone? Then I own the entire bread market (no more
payday loans available so the only micro-loans available are via NSF’s
and overdraft fees from the banks)?

Now, let’s get back to, “Nevertheless, banks with existing programs
have been able to generate long-term profitability through volume
and by using the SDL and NSDL products to cross-sell additional
products.” And what are “these cross-sell additional products?”
“The most commonly cross-sold products were checking accounts.”

Now we’re back to overdraft and NSF fees! WOW! WHAT A SURPRISE!

We know from previous studies, NOT SPONSORED BY CRL of course, NSF fees average $28.23,
according to .

Moebs Services, an economic research firm, estimates that NSF fees
See “Why Banks and Credit Unions Hate Payday Loans” at


Here’s a typical case study of this FDIC Pilot Program as
implemented by Citizens Trust. “Beginning in early 2008, through its
Columbus office only, Citizens Trust Bank targeted military personnel
at Fort Benning exclusively for its SDL product. After several months
of advertising in the Bayonet, the Fort Benning newspaper, and airing
radio advertisements, the bank originated only a few of the military
targeted SDLs.”

“Originations were hampered by competition from programs offered on
the military base that had already gained a large share of the market
among Fort Benning consumers.”

Did you pick up on this? “Originations were hampered by
How @#$%$%%^% ridiculous! The Citizens product
didn’t appeal to the military personnel. They preferred payday loans!
Why you ask? Look at this!

“As a result of low loan volumes, management decided to
significantly change its program by expanding the target market
beyond military personnel to include the general public. In December
2008, the bank began offering a new small-dollar product called the
“Community Relief Loan” at all of its branches. Citizens Trust Bank
primarily used radio advertising and signs in bank branches to
promote the product. According to Citizens Trust Bank’s Assistant
Vice President and Director of Consumer Lending Sharnell W. Reynolds,
in the first two months of the program, the Community Relief Loan
campaign had generated 574 applications and 81 originations totaling
more than $116,000. “

That’s a pathetic 14% approval rate! Why were only 14% of the
applicants approved?

Let’s take a look at the Citizen’s Trust loan requirements and
“The Community Relief Loan ranges from $500 to $1,500.
Each loan carries a $48 origination fee, and the interest rate is 15
percent. The maximum term on a $500 Community Relief Loan is six
months; one year is the maximum term on larger loans. To qualify,
borrowers must have a FICO credit score of at least 500, proof of
regular income for six months, no outstanding liens or judgments, and
have been at their current address for at least one year. The bank
also has alternative under-writing processes to accommodate
prospective borrowers with thin or no credit histories. The maximum
loan amount for these applicants is $500, and they must provide proof
of employment for the previous six months and show an alternate form
of good credit history. For instance, borrowers might provide proof
that they have paid their rent or utility bills on time for the
previous six months.”

“The loan approval process is decentralized and managed at each of
the bank’s ten branches by Financial Relationship Managers. Each
Financial Relationship Manager has Community Relief Loan approval
authority and uses a standard underwriting checklist to guide routine
application determinations. Those who recommend exceptions to the
checklist guidelines route their requests to the corporate offices in
Atlanta. With or without an exception, it generally takes less than
24 hours from the time an application is submitted to deliver a check
to an approved borrower. If all of the required borrower documentation
is on hand at the time an application is submitted, same-day delivery is

“Unlike the military-focused loan program that required linked
savings accounts, linked savings are optional under the Community
Relief Loan program.”

“Nevertheless, in the first two months of the program, Community
Relief Loan customers had opened a total of 52 new savings and
checking accounts. Borrowers are strongly encouraged to authorize
automatic debits of loan payments from a savings or checking account.
Although none of the loans were delinquent or in default as of the
fourth quarter, the program is still very new.”


OK, so here is their Conclusion:

“After one year, the FDIC’s Small-Dollar Loan Pilot Program has
provided evidence that banks can offer reasonably priced
alternatives to high-cost, short-term credit. Most participating banks
have determined that using SDL and NSDL products as a cornerstone for
building long-term profitable relationships is the most feasible
business model. Some banks believe that their location, underwriting
processes, and pricing structures will allow for short-term
profitability. Others focus solely on providing a service to the
community by ensuring that reasonably priced credit is available to
a broad range of consumers. The FDIC will continue to explore the
feasibility of participant banks’ programs as the pilot continues
over the next year. Banks and others interested in the pilot can
contact the FDIC at”

I wonder if it ever occurred to the FDIC to simply interview actual
customers as they leave real payday loan stores and those leaving
any of the banks participating in this FDIC Pilot Program? Nope!
They’re fearful of what will be revealed! Payday loans, rent-to-own,
buy-here-pay-here, pawn shops, checkcashers… in other words,
Micro-Lenders know their customers and will continue to offer products
and services that serve them! That is if we’re allowed to! And if
our products and services don’t make sense to our customers, we’ll be
out of business.

We don’t need government subsidies to exist! Our customers, by the
millions every year, prove we have products and services they want!

What do you think? Should the government be involved? Should the
government subsidize your competitors?

Let me know!


Payday Loans – How to Start a Payday Loan Internet Business

Payday Loans – How to Start a Payday Loan Internet Business

Regarding a payday loan internet business start-up, be aware that you don’t need thousands or hundreds of thousands of dollars to begin. We’ll teach you how to achieve this with less than $100! Also, you don’t need to partner with a bank in order to build a payday loan internet business.

Here are the real facts.

1) You can make a ton of money with a payday loan internet business and never fund a single payday loan.

2) Simply build a payday loan web site or payday loan blog. Be aware that payday loan blogs rank much higher in the search engine results much faster then static payday loan web sites. We’ll teach you how! Begin by visiting and read the two free reports, “Bloggers Bible” and “Blog Profits Blueprint.” Or, visit click on “Get Blogged Now” and pay roughly $250 for a tech savy developer to build a Blog for you.

3) Setup a free account with commission Junction, perform a search for payday loan companies who want to partner with you. You then “feed” payday loan customers from your web site or blog to the payday loan funding companies. In return you’ll earn, as of this writing, $20 to as much as $55 for each loan application.

4) Once you have your payday loan web site or payday loan blog “live” you’ll focus on techniques and strategies for “driving” significant payday loan customers to your web site so you can “feed” them to your payday loan funding partner.

5) When you’re ready, begin funding your own payday loans. Review our “Payday Loan Internet Report” for a thorough step-by-step discussion and full explanations to achieve this.

With our current economy, the demand for payday loans has never been greater. This is not rocket science! You can participate in the lucrative payday loan industry.

You really can literally make money in your underwear! Visit to find out how.


Payday Loans-Arbitration-False Imprisonment-Kentucky

A truly amazing payday loan story! We often learn of some really crazy payday loan incident stories but this one is NUTS! What were these payday loan employees thinking? Originally I thought perhaps the CRL might have made this one up but, NO, this story is true! Your thoughts?

RENDERED: JUNE 19, 2009; 10:00 A.M.
Commonwealth of Kentucky
Court of Appeals
NO. 2008-CA-001204-MR
ACTION NO. 08-CI-01340
** ** ** ** **
This is an appeal from an order of the
Fayette Circuit Court denying a motion to compel arbitration made by Valued
1 Senior Judge David C. Buckingham sitting as Special Judge by assignment of the Chief Justice
pursuant to Section 110(5)(b) of the Kentucky Constitution and Kentucky Revised Statutes
(KRS) 21.580.

Services of Kentucky, LLC, a check-cashing company, and two of its employees,
Angela Jackson and Mary Depue (hereinafter collectively referred to as Valued
Services), in a false imprisonment action filed by Floyd Watkins. The trial court
denied the motion on the ground that the arbitration provision of Watkins’s
“payday loan” contract with Valued Services was unconscionable. For the reasons
discussed below, we affirm.

On February 21, 2007, Floyd Watkins obtained a cash advance in the
amount of $250 from Valued Services, which did business in Lexington under the
name of Check Advance. As part of the loan transaction, Watkins signed a
document entitled “Customer Agreement.” Watkins had obtained loans from
Valued Services on five previous occasions, and on each of those previous
occasions, he had signed an identical “Customer Agreement.” These customer
agreements always included an identical arbitration provision.

Under the terms of the cash advance that Watkins obtained on
February 21, he was required to repay the loan by March 15. Although he had
always repaid the prior loans promptly, on this occasion Watkins claimed that he
was unable to repay the loan on time. According to the allegations in Watkins’s
complaint, he telephoned Valued Services in mid-March and told them that he was
out of state but would return in approximately one week, when he would repay the
cash advance.

Upon his return to Lexington, Watkins went to the Check Advance
store on Friday, March 23, and informed the store manager, Angela Jackson, that
he could not repay his loan on that day, but that he would be able to do so three
days later, on Monday, March 26. Jackson insisted that Watkins had to repay the
entire amount that day and stated that he was not leaving the premises until he had
paid in full. Jackson pushed a button to lock the office door and would not allow
Watkins to leave even though he repeatedly asked to do so.

Jackson telephoned her regional manager, Mary Depue, and told her
that “I have a black guy over here that refuses to pay his bill and he’s not going to
leave until he does.” Watkins then spoke to Depue and told her that he had always
repaid his loans on prior occasions, that he had to make his automobile loan
payment that day, and that he would repay Check Advance in full on Monday,
March 26. Depue then spoke to Jackson again. Jackson stated, “He’s going to pay
his bill or he’s not leaving . . . I want my money now!”

Payday Loan Laws and Legislation

Watkins attempted to leave the office, but Jackson again refused to
unlock the door, stating, “You ain’t going nowhere until you pay me my money.”
Watkins again tried to leave, pushing on the office door. He told Jackson if she did
not allow him to leave, he would call the police. In response, she shouted, “I don’t
care who you call, you are not going until you pay me my money.” Watkins
finally persuaded Jackson to allow him to use the office telephone to call a friend
to bring the money to repay the loan. Watkins instead called 911 and asked for the
police, telling the dispatcher that he was being held against his will at the Check
Advance store.

Watkins was finally able to leave the office after the arrival of the
police. He had been detained at the office for about one hour. Jackson told the
investigating police officer that she had been instructed by Depue not to allow
Watkins to leave the premises even if he called the police.

Watkins filed a complaint against Valued Services, Jackson, and
Depue in the Fayette Circuit Court on March 20, 2008, alleging false imprisonment
and seeking equitable and legal relief including declaratory and injunctive relief,
attorney’s fees, compensatory damages, costs, and punitive damages.
Valued Services moved the trial court for an order compelling
arbitration (and staying litigation pending the outcome of arbitration) arguing that
the Customer Agreement governing the loan transaction between Watkins and
Valued Services subjected his claims to mandatory arbitration, specifically a
subsection of the agreement that required arbitration of “all common law claims,
based upon contract, tort, fraud, or other intentional torts.” Following briefing and
oral argument, the trial court denied the motion, holding that the arbitration
provision requiring Watkins to arbitrate claims that did not arise from the
underlying loan transaction was unconscionable. Valued Services filed this appeal,
arguing that the arbitration provision was neither procedurally nor substantively
unconscionable and that the trial court erred as a matter of law in refusing to
compel arbitration.

The arbitration provision is set forth on the second page of the two page
Customer Agreement signed by Watkins. The customer’s signature is affixed
to the first page of the agreement, directly beneath the following statement in bold
Please note that this Agreement contains a binding
arbitration provision. By signing this Agreement you
acknowledge that it was filled in before you did so and
that you have received a completed copy of it. . . . You
further acknowledge that you have read, understand,
and agree to all of the terms on both pages of this
Agreement, including the provision entitled “Waiver
of Jury Trial and Arbitration Provision”, which is
located on the second page of this Agreement and is
marked Page 2 of 2.

Page 2 contains a full page of text in fine print. After supplying a
definition of arbitration, it sets forth the following arbitration provision. The only
claims that it exempts from arbitration are those brought in small claims court.
1. For purposes of this Waiver of Jury Trial and
Arbitration Provision (hereinafter the “Arbitration
Provision”), the words “dispute” and “disputes” are given
the broadest possible meaning and include, without
limitation (a) all claims, disputes, or controversies arising
from or relating directly or indirectly to the signing of
this Arbitration Provision, the validity and scope of this
Arbitration Provision and any claim or attempt to set
aside this Arbitration Provision; (b) all federal or state
law claims, disputes or controversies, arising from or
relating directly or indirectly to this Customer Agreement
(including the Arbitration Provision), the information you
gave us before entering into this Customer Agreement,
including the Customer Application, and/or any past
agreement or agreements between you and us; (c) all
counterclaims, cross-claims and third-party claims; (d) all
common law claims, based upon contract, tort, fraud, or
other intentional torts; (e) all claims based upon a
violation of any state or federal constitution, statute or
regulation; (f) all claims asserted by us against you,
including claims for money damages to collect any sum
we claim you owe us; (g) all claims asserted by you
individually against us and/or any of our employees,
agents, directors, officers, shareholders, governors,
managers, members, parent company or affiliated entities
(hereinafter collectively referred to as “related third
parties”), including claims for money damages and/or
equitable or injunctive relief; (h) all claims asserted on
your behalf by another person; (i) all claims asserted by
you as a private attorney general, as representative and
member of a class of persons, or in any other
representative capacity, against us and/or related third
parties (hereinafter referred to as “Representative
Claims”); and/or (j) all claims arising from or relating
directly or indirectly to the disclosure by us or related
third parties of any non-public personal information
about you.
2. You acknowledge and agree that by entering into this
Arbitration Provision:
. . . .
6. All parties, including related third parties, shall retain
the right to seek adjudication in the Kentucky state Small
Claims Court and District Courts for disputes within the
scope of such courts’ jurisdiction. All disputes asserted
in a Kentucky state Circuit Court shall be resolved by
binding arbitration. Any dispute, which cannot be
adjudicated within the jurisdiction of a Kentucky Small
Claims Court or District Court, as the case may be, shall
be resolved by binding arbitration. Any appeal of a
judgment from a Kentucky state District court shall be
resolved by binding arbitration.
. . . .
8. This Arbitration Provision is binding upon and
benefits you, your respective heirs, successors and
assigns. The Arbitration Provision is binding upon
and benefits us, our successors and assigns, and
related third parties. The Arbitration Provision
continues in full force and effect, even if your
obligations have been paid or discharged through
bankruptcy. The Arbitration Provision survives any
termination, amendment, expiration or performance
of any transaction between you and us and continues
in full force and effect unless you and we otherwise
agree in writing.

As a general rule, “Kentucky law favors arbitration agreements.”
Mortgage Electronic Registration Systems, Inc. v. Abner, 260 S.W.3d 351, 353
(Ky. App. 2008). KRS 417.050 provides in pertinent part that “[a] written
agreement to submit any existing controversy to arbitration or a provision in
written contract to submit to arbitration any controversy thereafter arising between
the parties is valid, enforceable and irrevocable[.]” Valued Services argues that the
express language of the statute, referring to “any controversy,” mandates the
enforcement of precisely the type of broad, all-encompassing arbitration agreement
at issue here. But the statute also contains a savings clause that permits a party to
avoid an arbitration agreement “upon such grounds as exist at law for the
revocation of any contract.” “In other words, the court – not an arbitrator – must
decide whether the parties have agreed to arbitrate based on fundamental principles
governing contract law.” Abner, 260 S.W.3d at 353.

It is a fundamental rule of contract law that, “absent fraud in the
inducement, a written agreement duly executed by the party to be held, who had an
opportunity to read it, will be enforced according to its terms.” Conseco Finance
Servicing Corp. v. Wilder, 47 S.W.3d 335, 341 (Ky. App. 2001) (citing Cline v.
Allis-Chalmers Corp., 690 S.W.2d 764 (Ky. App. 1985)). A narrow exception to
this rule is the doctrine of unconscionability, which
is used by the courts to police the excesses
of certain parties who abuse their right to
contract freely. It is directed against one-sided,
oppressive and unfairly surprising
contracts, and not against the consequences
per se of uneven bargaining power or even a
simple old-fashioned bad bargain.
An unconscionable contract has been characterized
as one which no man in his senses, not under delusion,
would make, on the one hand, and which no fair and
honest man would accept, on the other.
Unconscionability determinations being inherently fact sensitive,
courts must address such claims on a case-by-case

Id. at 341-42 (citations and quotation marks omitted) (emphasis supplied).
In its order denying the motion to compel, the trial court held that
the averments of Plaintiff’s Complaint concern issues
completely outside the scope of the contract in question,
and it would be unfairly surprising to compel binding
arbitration of these issues. These issues do not relate to
the underlying contract and could not reasonably have
been contemplated by the parties as subject to arbitration.
By analogy, the Court believes that ordering compulsory
arbitration of the issues raised herein would be akin to
ordering compulsory arbitration had Defendants sent 2
men to Plaintiff’s house to break his legs because he was
behind in his payments.

Although the trial court did not employ these terms, Valued Services
has challenged its finding of unconscionability under two categories: procedural
unconscionability and substantive unconscionability. Procedural or “unfair
surprise” unconscionability “pertains to the process by which an agreement is
reached and the form of an agreement, including the use therein of fine print and
convoluted or unclear language. . . .” Id. at 342-43, n.22. In Conseco, this Court
determined that an arbitration clause was not procedurally unconscionable on the
following grounds:
The clause was not concealed or disguised within the
form; its provisions are clearly stated such that
purchasers of ordinary experience and education are
likely to be able to understand it, at least in its general
import; and its effect is not such as to alter the principal
bargain in an extreme or surprising way.
Id. at 343.
Valued Services maintains that the same conditions prevailed in this
case: that the arbitration provision was boldly displayed and its existence twice
emphasized elsewhere in the contract document; that the terms of the provision
were plainly and thoroughly explained, using everyday language capable of being
understood by persons of ordinary education and experience; that the waiver of the
right to a jury trial was emphasized in a bold font and capital letters; that Watkins
was given every opportunity to read the provision; and that the provision did not
alter the principal bargain – the loan transaction – between Valued Services and
Watkins in an extreme or surprising fashion.

What is not clear, however, is whether a person of ordinary education
and experience would understand that his waiver of a jury trial extended far
beyond disputes relating to the payday loan to encompass every imaginable
unrelated claim that might arise between him (and his heirs, successors, and
assigns) and Valued Services and its “employees, agents, directors, officers,
shareholders, governors, managers, members, parent company or affiliated
entities.” Would an individual like Watkins, when he obtained a loan advance for
the relatively small sum of $250, understand that in so doing he had permanently
waived his right to ever bring a civil action against the company and its employees
for the commission of an intentional tort?

“It is difficult to fathom that one would knowingly compromise her
right to sue for intentional tort claims.” Solis v. Evins, 951 S.W.2d 44, 51 (Tex.
App. 1997). The Supreme Court of South Carolina has stated that
[b]ecause even the most broadly-worded arbitration
agreements still have limits founded in general principles
of contract law, this Court will refuse to interpret any
arbitration agreement as applying to outrageous torts that
are unforeseeable to a reasonable consumer in the context
of normal business dealings.

Aiken v. World Finance Corp. of South Carolina, 644 S.E.2d 705, 709 (S.C. 2007)
(footnote omitted). Although such a rule of interpretation does not exist in
Kentucky law, it is particularly applicable in this case. “As with any contractual
matter our main concern in deciding the scope of arbitration agreements is to
faithfully reflect [] the reasonable expectations of those who commit themselves to
be bound by [them].” Leadertex, Inc. v. Morganton Dyeing & Finishing Corp., 67
F.3d 20, 28 (2nd Cir. 1995) (citation and quotations marks omitted).
Moreover, a broad waiver of the type at issue here is particularly
suspect when it is contained in a contract of adhesion. In Conseco, this Court gave
as an example of procedural unconscionability
‘material, risk-shifting’ contractual terms which are not
typically expected by the party who is being asked to
‘assent’ to them and often appear [ ] in the boilerplate of
a printed form. The notion of procedural
unconscionability thus includes many of the concerns
raised by contracts of adhesion.
Conseco, 47 S.W.3d at 343 n.22 (citations omitted).
“[T]here is a significant difference between an adhesion contract in
which the parties have disparate bargaining power and a contract which voluntarily
has been entered into by sophisticated and knowledgeable businessmen concerning
a financial transaction of considerable magnitude.” Buck Run Baptist Church, Inc.
v. Cumberland Sur. Ins. Co., Inc., 983 S.W.2d 501, 504 (Ky. 1998). The
arbitration agreement in this case is undeniably a contract of adhesion made
between parties with disparate bargaining power, and the waiver of the right to
pursue a civil action in circuit court is certainly a material contractual term, which
is stated in fine print within the boilerplate of the printed form. Recently, in
finding an arbitration clause in a mortgage contract to be unconscionable, this
Court quoted with approval a West Virginia court which “while noting that a
bargain is not unconscionable merely because the parties to it are unequal in
bargaining position, held that an arbitration clause that contains a ‘substantial
waiver of a parties’ rights’ is unenforceable.’” Abner, 260 S.W.3d at 354 (citing
Arnold v. United Companies Lending Corp., 204 W.Va. 229, 511 S.E.2d 854, 861-
862 (1998)).

Valued Services also contends that the arbitration provision is not
substantively unconscionable. Substantive unconscionability “refers to contractual
terms that are unreasonably or grossly favorable to one side and to which the
disfavored party does not assent.” Conseco, 47 S.W.3d at 343, n.22 (citation
omitted). Valued Services argues that the arbitration provision is not substantively
unconscionable because it is equally binding on both parties, obligates Valued
Services to advance the customer’s portion of the arbitration fees, which the
customer is not obliged to reimburse, and does not limit the remedies available to
the customer. Valued Services reiterates that the wording of KRS 417.050
recognizes that parties to a contract may agree to submit “any controversy”
between them to arbitration, not exclusively controversies relating to the
underlying contract. It also cautions that if we should affirm the order of the trial
court, we would improperly create public policy by deciding that an agreement that
does no more than what the General Assembly expressly condones is

As we have already stated, however, unconscionability is a well established
doctrine of contract law in Kentucky, and it is well within the province
of the courts to find any contract, including one made pursuant to KRS 417.050,
unconscionable. This point was made very effectively in an opinion of the U.S.
Court of Appeals for the Seventh Circuit in regard to the relationship between the
Federal Arbitration Act and contract law:
Nothing in the Federal Arbitration Act overrides normal
rules of contractual interpretation; the Act’s goal was to
put arbitration on a par with other contracts and eliminate
any vestige of old rules disfavoring arbitration.

Arbitration depends on agreement, see First Options of
Chicago, Inc. v. Kaplan, 514 U.S. 938, 943, 115 S.Ct.
1920, 131 L.Ed.2d 985 (1995); AT & T Technologies,
Inc. v. Communications Workers, 475 U.S. 643, 648-49,
106 S.Ct. 1415, 89 L.Ed.2d 648 (1986), and nothing
beats normal rules of contract law to determine what the
parties’ agreement entails. There is no denying that
many decisions proclaim that federal policy favors
arbitration, but this differs from saying that courts read
contracts to foist arbitration on parties who have not
genuinely agreed to that device.

Stone v. Doerge, 328 F.3d 343, 345 (7th Cir. 2003).
Case law from other states is replete with examples of courts
upholding the principle that “even the broadest arbitration clauses obviously
cannot cover every type of dispute that might arise.” RN Solution, Inc. v. Catholic
Healthcare West, 81 Cal.Rptr.3d 892, 902 (Cal.Ct.App. 2008).
To hold otherwise would allow persons signing broad
arbitration provisions to commit intentional torts against
one another, which torts are outside the scope of their
contemplated dealings, without concern that they might
have to answer for their actions before a jury of their

Fountain Finance, Inc. v. Hines, 788 So.2d 155, 158 (Ala. 2000) (citation omitted).
See also Coors Brewing Co. v. Molson Breweries, 51 F.3d 1511, 1516 (10th Cir.
1995) (“if two small business owners execute a sales contract including a general
arbitration clause, and one assaults the other, we would think it elementary that the
sales contract did not require the victim to arbitrate the tort claim because the tort
claim is not related to the sales contract.”)

There is no case law in Kentucky that addresses the type of broad
arbitration provision at issue here. But an almost identical arbitration agreement,
made pursuant to a payday loan, was the subject of an opinion by the U.S. Court of
Appeals for the Seventh Circuit. See Smith v. Steinkamp, 318 F.3d 775 (7th Cir.
2003). In that case, a payday loan borrower, Smith, signed an agreement
containing an arbitration provision very similar to the one in this case. Smith took
out another loan some time later, but she did not sign the agreement on that
occasion. The payday lender, Instant Cash, argued that the terms of the arbitration
provision in the earlier loan agreement also governed all future loans that were
made to Smith.

In discussing the terms of the arbitration provision, the Court, in an
opinion authored by Judge Richard Posner, held that the sections waiving the right
to a jury trial had to be interpreted as relating in some way to the underlying loan
agreement. The concerns expressed by Judge Posner mirror almost exactly those
of the trial court in this case:
If (b) through (f) [which correspond almost exactly to
sections 1(b) through (f) in the Valued Services
arbitration provision] are read as standing free from any
loan agreement, absurd results ensue, for example that if
Instant Cash murdered Smith in order to discourage
defaults and her survivors brought a wrongful death suit
against Instant Cash (a “common law” suit, thus
encompassed by (c)), Instant Cash could insist that the
wrongful death claim be submitted to arbitration. For
that matter, if an employee of Instant Cash picked
Smith’s pocket when she came in to pay back the loan,
and Smith sued the employee for conversion, he would
be entitled to arbitration of her claim. It would make no
difference that the conversion had occurred in Smith’s
home 20 years after her last transaction with Instant

The defendants’ lawyer blanched when confronted
with such hypothetical cases at oral argument but was
unable to suggest a limiting principle.
Smith, 318 F.3d at 777.

The Smith court accordingly held that the arbitration agreement signed
by Smith when she took out the initial loan was inapplicable to subsequent or
future loans. The Court did not therefore reach the question of unconscionability,
but it did comment as follows:
A cynic might argue that, given the desperation of
people who take out payday loans, these plaintiffs would
have signed anything, so that relieving them from the
duty to arbitrate gives them a windfall based on an
oversight by Instant Cash. The defendants do not make
this argument, however, perhaps fearing that it would
invite a conclusion that payday loans are unconscionable
and therefore unenforceable even in states that do not
deem them usurious.
Id. at 778.

Finally, Valued Services argues that the trial court’s decision is not
supported by the case law on which it purports to rely. Valued Services notes that,
of the three cases cited by the trial court (Conseco Finance Servicing Corp. v.
Wilder, 47 S.W.3d 335 (Ky. App. 2001), Hill v. Hilliard, 945 S.W.2d 948 (Ky.
App. 1996), and Anthem Health Plans of Kentucky, Inc. v. Academy of Medicine of
Cincinnati, 2004 WL 2413666 (2003-CA-000752-MR; 2003-CA-000753-MR;
2003-CA-000754-MR) (Ky. App. 2004)), none stand for the proposition that an
arbitration provision that provides for arbitration of matters other than those arising
directly from the underlying contract is unconscionable.

Conseco provides the fullest discussion in our case law of the doctrine
of unconscionability as it relates specifically to arbitration agreements, and the trial
court did not therefore err in relying on it. Simply because the Conseco court
focused on different grounds for finding unconscionability than those raised here,
and concluded that the agreement at issue was not unconscionable, does not mean
that the opinion was irrelevant to the trial court’s analysis in this case.
In Hill and in Anthem, the doctrine of unconscionability was never
invoked. Both cases stand for the proposition that it is within the power of the
courts to delineate the scope of an arbitration provision. In Hill, it was held that
claims for sexual assault and battery, intentional infliction of emotion distress, and
false imprisonment were not within the scope of an arbitration agreement which
was confined to “[a]ny controversy . . . arising out of employment or termination
of employment[.]” Hill, 945 S.W.2d at 950. In Anthem, this Court upheld the trial
court’s ruling that the antitrust claims of a group of physicians against an insurance
company were not subject to arbitration because they fell outside the scope of the
arbitration agreement, which applied to “any disputes arising out of or relating to
the provider agreement or business relationship.” It did so on the ground that the
antitrust action could be maintained without reference to the provider agreement or
the business relationship.

Valued Services argues that the Anthem court erred in looking beyond
the language of the arbitration provision to the underlying contract. Valued
Services further appears to contend that, if we affirm the trial court, we would in
effect establish a rule that a claim, in order to be arbitrable, must always relate to
the underlying contract. That is not our intention. Although there is no
requirement under Kentucky law that claims must relate to the underlying
transaction in order to be arbitrable, the nature of the underlying transaction may
certainly be considered in assessing whether an arbitration agreement is
unconscionable when applied to a particular set of facts. In this case, the
arbitration provision is unconscionable because it encompasses an intentional tort
with so little connection to the underlying agreement that it could not have been
foreseen by Watkins when he signed that agreement.

For the foregoing reasons, the order of the Fayette Circuit Court
denying the motion to compel arbitration is affirmed.
Sasha Y. Wagers
Lexington, Kentucky
Mark R. Overstreet
Frankfort, Kentucky
Debra Ann Doss
Lexington, Kentucky