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Gulfco of La., Inc. v. Brantley - 2013 Ark. 367, 430 S.W.3d 7 (2013)


An act is unconscionable if it affronts the sense of justice, decency, and reasonableness. In assessing whether a particular contractual provision is unconscionable, Arkansas courts review the totality of the circumstances surrounding the negotiation and execution of the contract. Two important considerations are whether there is a gross inequality of bargaining power between the parties and whether the aggrieved party was made aware of and comprehended the provision in question. Another factor which may contribute to a finding of unconscionability is a belief by the stronger party that there is no reasonable probability that the weaker party will fully perform the contract. The Arkansas consumer-protection law, which is an expression of the state's public policy, is consistent with this.


Plaintiff Gulfco of Louisiana, Inc., d/b/a Tower Loan of Springhill, Louisiana ("Gulfco") was in the business of extending high-risk loans to customers with poor credit ratings. It operated primarily in Louisiana, Mississippi, and Missouri. Defendants Pamela and MacArthur Brantley, who resided in Arkansas, obtained four loans over a two-year period from Gulfco at its location in Louisiana. The loans ranged in amounts from $1,580.36 to $20,887.71, with different annual interest rates ranging from 24.09 to 40.20 percent. One loan was secured by a mortgage on the Brantleys' home. Each loan also carried various fees and charges, which were deducted from the loan proceeds before the Barclays received any funds. The Brantleys made no payments on the loans after March 31, 2011. On July 1, 2011, Gulfco filed in Arkansas circuit court a "Notice of Default and Intention to Sell," alleging that the mortgage on the Brantleys' home was in default and stating that a sale of the home would occur. The Brantleys denied the substantive allegations of the notice, and they asserted the defenses of, inter alia, usury, unconscionability and predatory lending practices. Thereafter, the Brantleys filed a petition for a preliminary injunction to halt the proposed sale of their home. Gulfco did not file a response to the petition. The circuit court entered an order granting the Brantleys' request for a preliminary injunction. Gulfco appealed.


Did the circuit court err in finding that the loans from Gulfco to the Brantleys were unenforceable and violative of public policy?




The state supreme court affirmed the circuit court's judgment. The court ruled that the circuit court properly refused Gulfco's request to foreclose on Brantleys' home on grounds that the debts instruments were not enforceable and were against the public policy of Arkansas in that they were clearly unconscionable and the product of predatory lending practices. The evidence showed that the Brantleys were not capable of making their payments from the beginning. Subsequent loans were made to pay off previous notes or to bring their payments current. Despite the Brantleys' demonstrated inability to pay, Gulfco continued to loan them money. Each loan, which included built-in fees and high interest rates, placed the Brantleys in a position of ever-increasing debt, such that it was all but inevitable that they would end up in default. The court also rejected Gulfco's claims that the circuit court erred in: (1) applying Arkansas usury law to decline enforcement of the debt instruments, and; (2) in concluding that Gulfco was required to be licensed by the Arkansas Secretary of State.

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