Congress attacks payday lenders after SCOTUS frees them – people’s world
WASHINGTON – Well, it didn’t take long.
A week after the United States Supreme Court unanimously awarded payday lenders to one of the most shady sectors of the corporate class, a major court victory, lawmakers have taken up l author of the decision, Judge Stephen Breyer, that they could overturn 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 scam consumers with triple-digit interest rates and interest stacked on top of the interest. And they urged lawmakers to restore the authority of the Federal Trade Commission to impose heavy fines on these gougers and con artists.
And witnesses have supported HR2668, by panel chair, Rep. Jan Schakowsky, D-Ill., And Rep. Tony Cardenas, D-Calif., To explicitly give the FTC the power to financially crush crooks.
Payday lenders have been known to lend money to the poor and the working class, often people of color who live paycheck to paycheck, by advancing money charged against those checks. Annual interest rates are three digits or more. AMG, the payday lender that sued the FTC–charged monthly interest of 30% in the example cited by Breyer.
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 embolden 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 with the power to make them whole. 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 equivalent to 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 the 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. This pact stipulated that 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 by justifying its high fines against AMR and similar crooks. He said the article allowed the FTC to seek court injunctions against such practices, but that was it. He could use another section and lengthy process to seek smaller, unspecified fines to deter potential financial abuse, not to claim past damages, he added.
Not enough to stop them
Witnesses and lawmakers said that was 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 come to the aid of victims of fraud and scams” and “take money out of the pockets of hard-working Americans.”
Due to the latest ruling and those before it which also hamper the FTC, “the agency that’s supposed to protect me – as well as 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, ”said University of California law professor Ted Mermin. It is also understaffed, he added.
Without the power to collect hefty fines, “the FTC is unable to perform its most basic function of recovering money for those to whom it has been illegally taken,” added Mermin, who also heads California Low. -Income Consumer Coalition.
As the United States emerges from the coronavirus pandemic, the need for a robust FTC increases, he warned. As the economy recovers from a virus-forced shutdown, “unfair and deceptive practices of all kinds will continue to besiege us. They will particularly 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 lawyers to prosecute con artists, and because medical clinics legal aid are overburdened and understaffed, Mermin said.
Although she did not testify before the panel, the Chamber of Commerce, as might be expected, sided with payday lenders and other crooks.
“The FTC is advocating for legislative change on the grounds that it needs the right tools to fight ‘scams’,” the business lobby said. “However, instead of asking for a legislative solution that allows the agency to target such heinous practices,” the FTC wants “a radical expansion of its authority” to allow it to “universally seek monetary damages.”
This inadvertent statement highlighted the real impact of the court’s decision: that it allows all businesses, not just payday lenders, to engage in such practices without the threat of FTC’s high fines don’t deter them – a point the USPIRG made in its exposure of the ruling.