Small font, big implications: What the Sixth Circuit just validated for lenders
Mortgage lenders just won the right to enforce website arbitration clauses, a federal appeals court ruled, if disclosure pages are designed correctly.
The Sixth Circuit issued its decision on January 26, settling a question that has kept compliance teams up at night: can you enforce an arbitration clause when customers click through your website without creating an account or signing anything?
The answer, at least in Michigan, Ohio, Kentucky and Tennessee, is yes – if you design your site the right way.
Here's what happened. Michael Dahdah visited LowerMyBills.com three times over several months in 2020 and 2021, hunting for mortgage refinancing options. The site, which shares a parent company with Rocket Mortgage, walked him through the usual drill: property details, employment status, contact information. Each time he clicked through, he got matched with Rocket refinancing offers. He never followed through.
Fast forward to summer 2022. Rocket called Dahdah at least eight times in four days trying to sell him mortgage products. Some calls came at 5:00 in the morning. His number had been on the Do Not Call registry since 2017. Dahdah was not happy.
He sued under the Telephone Consumer Protection Act, the federal law that lets consumers go after companies for unwanted calls. Rocket pointed to the arbitration clause buried in those LowerMyBills terms of use and asked the court to kill the lawsuit. A district court judge sided with Dahdah, finding the website disclosure was not sufficiently conspicuous to create an enforceable agreement.
The appeals court disagreed. Writing for a three-judge panel, Circuit Judge Murphy walked through what LowerMyBills did right. The site placed its disclosure right below the big green buttons that said "Calculate" and "Calculate your FREE results." The key terms were hyperlinked in blue against a white background. The page used dynamic scrolling, meaning users couldn't miss the disclosure as they filled out their information.
Sure, the font was small. But the page was clean and uncluttered, unlike the busy, distraction-filled websites that courts have rejected. And unlike some sites that vaguely tell users they "agree" to something, LowerMyBills spelled it out: by clicking this button, you consent to these specific terms.
The court also noted something mortgage professionals know well. When someone visits a referral site and hands over their contact information to connect with lenders, they should expect some kind of ongoing relationship. That's different from buying socks online. People understand there are strings attached to free services.
What does this mean for your shop? If you're using online lead generation or referral platforms, this case offers a template. Keep your disclosure pages simple. Put your terms right next to whatever button users need to click. Use hyperlinks in contrasting colors. Make clear what action constitutes agreement.
The court drew heavily from recent cases involving Uber, Airbnb and Ticketmaster, where similar approaches passed muster. Small font alone won't kill your agreement if everything else checks out.
One interesting wrinkle: Dahdah argued he never actually read or understood the terms. The court shut that down fast. Under California contract law, which governed this case, what matters is whether a reasonable person would understand an offer was being made and that clicking equals acceptance. Your subjective state of mind doesn't matter.
The decision also addressed some technical concerns about arbitration. Dahdah complained that the terms left too many details unresolved, like which arbitration organization would handle disputes or how many arbitrators would decide the case. The court said the Federal Arbitration Act fills those gaps automatically when contracts stay silent.
For mortgage companies facing class actions over marketing calls, lending practices or fee disputes, this ruling strengthens your ability to move cases out of court and into arbitration. But it also puts the burden on you to get your website design right from the start.
