Congress attacks payday lenders after SCOTUS frees them – people’s world
WASHINGTON – Well, it didn’t take long.
A week after the U.S. Supreme Court unanimously handed down one of the most sordid sectors of the corporate class, payday lenders, a big court victory, lawmakers took up the suggestion of the author of the decision, Judge Stephen Breyer, that they could reverse the victory.
So consumer advocates came together to tell the House consumer protection subcommittee on April 27 to do so.
They testified how payday lenders cheat consumers with triple-digit interest rates and interest stacked on interest. And they urged lawmakers to restore the power of the Federal Trade Commission to impose heavy fines on these scammers and con artists.
And witnesses supported HR2668, by the committee chair, Rep. Jan Schakowsky, D-Ill., And Rep. Tony Cardenas, D-Calif., To explicitly give the FTC that authority to financially crush the crooks.
Payday lenders have been known to lend money to the poor and working class people, often people of color who live paycheck to paycheck, by advancing money billed on those checks. Annual interest rates exceed three digits or more. AMG – the payday lender that sued the FTC – charged 30% monthly interest in the example Breyer cited.
HR2668 and the audience applauded the National Consumers League, which has campaigned against the scourge of payday lenders for decades. The April 22 court ruling “put the interests of a convicted con artist above the needs of victims of fraud,” said John Brevault, vice president of public policy for the worker-backed consumer group.
“We are incredibly disheartened by the decision to deprive the FTC of one of its most effective tools for recovering ill-gotten gains from criminals. This move will encourage the criminals who defraud millions of consumers every year, costing them billions of dollars and untold emotional damage.
“We hear almost every day from victims of scams whose financial lives have been ruined by crooks. Consumers need and deserve a consumer protection agency empowered to ensure their integrity. Congress should urgently pass legislation restoring the FTC’s power to seek compensation on behalf of victims of fraud. “
The judges had overturned a $ 1.3 billion FTC fine against payday lender Scott Tucker and his company, AMG Capital Management. The fine was the amount AMG wiped out of consumers from 2008 to 2012. In addition to charging 30% monthly interest on a typical $ 300 loan, the now racketeering Tucker would continue to rack up fees, interest on interest and principal, month after month, just like the rest of the industry.
The only way for the consumer to avoid such a financial burden is to decipher the fine legalistic print of AMR’s loan agreement. According to this pact, the only way to opt out was not only to repay the entire loan after one month, but to refuse in writing to let AMR renew it.
Breyer wrote that the FTC went too far and misinterpreted Section 13 (b) of its 107-year-old law into justifying its high fines against AMR and other similar fraudsters. He said the section allowed the FTC to seek court injunctions against such practices, but that was it. He could use another section, and a lengthy process, to seek smaller, unspecified fines to deter possible financial abuse, not to recoup past damage, he added.
Not enough to stop them
Witnesses and lawmakers have said that is not enough to stop payday lenders.
“For decades, the Federal Trade Commission has protected consumers by seizing and returning stolen money to victims of fraud,” Schakowsky said. The court benefited “crooks and criminals around the world”. HR2668 “will restore the agency’s authority to provide relief to victims of fraud and scams” and “take money out of the pockets of American workers.”
Due to the latest ruling and previous rulings which also hamper the FTC, “The agency that’s supposed to protect me – along with my 86-year-old mother and teenage daughter, and my former students who are now in the military – no longer has the tools to do its job, ”testified University of California law professor Ted Mermin. It is also short-staffed, he added.
Without the power to impose hefty fines, “the FTC is unable to perform its most basic function of recovering money for the people from whom it was illegally uprooted,” added Mermin, who also heads the California Low- Income Consumer Coalition.
With the United States emerging from the coronavirus pandemic, the need for a robust FTC is increasing, he warned. As the economy recovers from a virus-enforced shutdown, “unfair and deceptive practices of all kinds will continue to besiege us. They will specifically target seniors, veterans, low-income communities, communities of color and family businesses.
The FTC’s “need for public enforcement capacity” is “acute” because 90% of low-income people cannot afford to hire private attorneys to prosecute fraudsters, and because medical clinics Legal aid is overloaded and understaffed, Mermin explained.
Although she did not testify before the panel, the Chamber of Commerce, as might be expected, sided with payday lenders and other corporate fraudsters.
“The FTC is advocating for legislative change on the pretext that it needs the right tools to fight ‘scams’,” the business lobby said. “However, instead of asking for a legislative solution that empowers the agency to target these heinous practices,” the FTC wants “a radical expansion of its authority” to let it “universally claim monetary damages.”
This inadvertent statement underscored the real impact of the court ruling: that it allows all businesses, not just payday lenders, to engage in such practices without the threat of the FTC. high fines deter them – a point the USPIRG made in its denunciation of the ruling.