Consumer Rights

Corporate Court Rewrites Credit Law to Favor the 1%

Yesterday, the Supreme Court issued an 8-1 opinion in CompuCredit v. Greenwood, written by Justice Scalia, that will bring cheer to powerful corporations that break the law and leave everyday consumers feeling shell-shocked. It turns out that a congressional requirement that companies tell consumers that they have the "right to sue" really doesn't mean much.

CompuCredit is a "credit-repair company" that marketed a subprime credit card to vulnerable consumers with bad credit. It told them that no deposit was required and that they would get $300 in credit upon issuance of the card. However, in small print separate from the "no deposit" promise, it disclosed that it would charge $185 in fees immediately and $257 in fees over the first year. The customers filed a class action lawsuit on behalf of others who were taken in, saying that CompuCredit violated the federal Credit Repair Organization Act (CROA).

However, CompuCredit had required its customers, as a condition of getting the credit card, to sign away their right to sue in a court of law or to engage in any type of class action, forcing them to agree to one-on-one binding arbitration instead. So the company demanded that the class action suit be thrown out of court, citing an obscure but devastatingly important federal law called the Federal Arbitration Act, which generally requires courts to enforce contracts requiring arbitration agreements unless a specific federal statute says otherwise.

The question was whether CompuCredit had the right to make its customers sign a contract agreeing to arbitration. CROA requires credit providers to specifically tell customers in writing that "you have a right to sue," a requirement that CompuCredit had met. In addition, CROA specifically prohibits any contractual provisions that waive a customer's rights under the statute. So the customers argue that their agreement to forego their right to sue in court is void.

In order to rule for the large company that cheated its vulnerable customers, the six-Justice majority opinion had to turn logic on its head. The five conservatives, joined by Justice Breyer, explained with a straight face that:

[The phrase "right to sue"] is a colloquial method of communicating to consumers that they have the legal right, enforceable in court, to recover damages from credit repair organizations that violate the CROA. We think most consumers would understand it this way, without regard to whether the suit in court has to be preceded by an arbitration proceeding.

Yes, it turns out that everyday people interpret the "right to sue" as including private arbitration. If this bizarre supposition didn't hurt so many innocent people, it would be laughable. At least Justices Sotomayor and Kagan, in their concurrence, recognized that the people the statute was designed to protect might interpret "right to sue" to mean "right to sue in court." Unfortunately, even they felt it was a close call as to whether that's what Congress intended.

Only Justice Ginsburg got this one right. As she wrote in her dissent:

The "right to sue," the [majority] explains, merely connotes the vindication of legal rights, whether in court or before an arbitrator. That reading may be comprehensible to one trained to "think like a lawyer." But Congress enacted the CROA with vulnerable consumers in mind—consumers likely to read the words "right to sue" to mean the right to litigate in court, not the obligation to submit disputes to binding arbitration.

Congress wrote this law for the 99%. Yesterday, the Corporate Court rewrote it for the 1%.

PFAW

Ornstein: Senate GOP Causing "Damage to the Vital Interests of the United States"

The latest condemnation of the Senate GOP's dangerous obstruction against executive and judicial nominees comes from Norman Ornstein, a resident scholar at the conservative American Enterprise Institute. In a column published in Roll Call, Ornstein blasted Senate Republicans for the damage they are doing to our country.

Last week, Republicans blocked a vote on the nomination of Caitlin Halligan to serve on the D.C. Circuit Court of Appeals, setting a new standard for nominees to that court that will be virtually impossible for any president of either party to meet. Just two days later, they blocked a confirmation vote for Richard Cordray to head the Consumer Financial Protection Bureau, admitting that they did so not because of any problems with him but because they do not like the law creating that Bureau. Next, two days ago, Senate Democrats tried to overcome Republicans' obstruction of ambassadorial nominees, with mixed results. Ornstein writes:

The good news on Monday was that the Senate, in a show of broad bipartisan support, confirmed Norm Eisen to be the U.S. ambassador to the Czech Republic.

Eisen had been in the post for the past year on a recess appointment, and by all accounts, Czech and American, had been doing an exemplary job protecting and advancing American interests and values in a country that is a critical ally to the United States and an important commercial and trading partner. Why the recess appointment? Because Sen. Chuck Grassley (R-Iowa) decided well over a year ago that Eisen, while serving in the White House, had not been truthful to the Senator's staff over his role in the dismissal of the inspector general of AmeriCorps. Never mind that a voluminous record showed that Eisen had not dissembled, that the entire board of AmeriCorps, left to right, Democrats and Republicans, supported the dismissal, and the actions were upheld in two federal courts. Grassley would not budge.

Senate Democrats filed a successful cloture petition and Eisen was confirmed by voice vote. But the obstruction continued with a politically motivated filibuster of Mari Carmen Aponte to be ambassador to El Salvador. Aponte is now serving under a recess appointment, which expires at the end of the month.

The ostensible reason to oppose her? Decades ago Aponte had a boyfriend who might have had ties to Fidel Castro's government. Never mind that Senators had access to her FBI file — and that she has had a succession of top-secret clearances after exhaustive security checks. Aponte did not fare well — she fell 11 votes shy of the 60 needed once again to overcome cloture.

In a different world — i.e., the world the United States knew from 1789 until a few years ago — her 49-37 margin would have meant a comfortable confirmation. No more. Filibusters used to be rare events for bills, rarer for executive confirmations, rarer still for judicial nominations. Now they are more than routine; they are becoming the norm. Holds were not as rare, but the use of holds to block multiple nominees for not weeks or months but years or until death, were not typical; now they are the standard.

Citing other ongoing examples of Republican senators sabotaging ambassadorial nominations to countries key to U.S. security, Ornstein sums up the situation:

This goes beyond partisan polarization to damage to the fabric of governance and worse — to damage to the vital interests of the United States. ...

[S]hame on a Senate which went from blocking a well-qualified nominee for an appeals court judgeship via filibuster to blocking a superbly qualified nominee for the consumer bureau, to yet another in a series of ambassadors stymied via holds and filibusters. This is no way to govern.

PFAW