Opinion ID: 1210758
Heading Depth: 1
Heading Rank: 6

Heading: Associates' Conduct Under the UCCC-Unconscionability

Text: As an equitable remedy, whether a contract is unconscionable has traditionally been a question of law for the court. This tradition endorsed by the Model Act has been changed in K.S.A. 16a-5-108, which provides that the trier of fact determines whether a particular bargaining context or contract clause is unconscionable. Enforcement, however, remains with the court. K.S.A. 16a-5-108(3) provides that a charge or practice expressly permitted by this act is not unconscionable. Associates argues the origination fees it charged are authorized by the UCCC; therefore, under K.S.A. 16a-5-108(3), its actions cannot be unconscionable. Gonzales responds that the circumstances here show a churning of loans, excessive origination fees, and unconscionable conduct. Gonzales relies upon K.S.A. 16a-5-108, Comment 5, which provides: Subsection (3) prohibits a finding that a charge or practice expressly permitted by the U3C is in itself unconscionable. However, even though a practice or charge is authorized by the U3C, the totality of a particular creditor's conduct may show that the practice or charge is part of unconscionable conduct. K.S.A. 16a-5-108 itself suggests Gonzales' claim for damages based on unconscionability is miscast. Unconscionability under the UCCC is an affirmative defense to the enforcement of a credit agreement. K.S.A. 16a-5-108 does not create an independent claim for damages. Consumer remedies, i.e., affirmative claims for damages under the UCCC are set out in K.S.A. 16a-5-201. Gonzales relies on Wille v. Southwestern Bell Tel. Co., 219 Kan. 755, 549 P.2d 903 (1976) (an advertiser who had been left out of the yellow pages sought to avoid enforcement of contractual limitation on remedies). In Wille, which is not a UCCC case, the contract in issue limited Southwestern Bell's liability to the cost of the advertisement. Gonzales also cites Topeka Datsun Motor Co. v. Stratton, 12 Kan. App.2d 95, 107-08, 736 P.2d 82, rev. denied 241 Kan. 840 (1987) (Stratton alleged unconscionability under K.S.A. 16a-5-108 as a defense to repossession of her Datsun pickup by plaintiff dealer). Gonzales' authorities are examples of asserting unconscionability unsuccessfully to avoid enforcement of a contract in whole or in part. Neither party has directed us to a statute similar to K.S.A. 16a-2-401(9)(b) or to case law addressing origination fee/nonrefundable prepaid finance charge unconscionability. Gonzales has not cited any case in which a practice authorized by the UCCC has been held to be unconscionable conduct under the UCCC. Comment 5 to K.S.A. 16a-5-108 stands as a caveat to lenders. Where enforcement of a loan agreement is at issue, we do not foreclose the possibility that in a future case, conduct which facially complies with K.S.A. 16a-2-401(9)(b) may not find a safe harbor in the language of 16a-5-108(3). In such cases, the trial court may consider the creditor's total conduct, including that part of the creditor's conduct which is in accordance with the provisions of the U3C. K.S.A. 16a-5-108, Comment 5. We conclude Comment 5 is not implicated here.