Yet Another Reason to Hate SCOTUS: It's Made It Easier for Payday Lenders to Prey on the Poor
Photo Credit: Stephen Masker / Creative Commons
The Supreme Court doesn’t like poor people very much.
Recent rulings by the Court have had a profoundly harmful impact on the health, lives, and livelihoods of poor folks. The best-known example is the Court’s ruling on the Affordable Care Act, which allowed states to opt out of Medicaid. That is an option that 24 states have chosen to take. It will leave nearly six million low-income Americans without health insurance. They would have had that insurance were it not for the Supreme Court. How many people will lose their health, and their lives, because the Supreme Court denied them health coverage? I would love to know.
Moreover, the ACA decision was hardly the Court’s only front in its war on the poor. In another recent ruling, SCOTUS bent over backwards to make it easier for payday lenders to rob poor people blind. As Emily Bazeldon reports in today’s New York Times Magazine, class action lawsuits can be a powerful tool to crack down on predatory lenders. However, one thing the payday lenders usually do is to force borrowers to sign away their rights to file lawsuits and to agree to lender-friendly “individual arbitration” instead.
A disturbing 2011 5-4 Supreme Court decision written by Justice Antonin Scalia stripped away consumers’ rights to file class action lawsuits if they’d agreed to mandatory arbitration — no matter how fine the print on the agreement they might have signed. Writes Bazeldon:
The text of the law was clear, Scalia said — it “was designed to promote arbitration,” and states couldn’t get in the way. Judith Resnik, a professor at Yale Law School, told me that Scalia’s interpretation was “in no way consistent with what we know Congress was doing in 1925.” Back then, “arbitration was negotiated between merchants, not imposed by merchants on their customers and employees.” Nevertheless, at least 139 class-action lawsuits have been thrown out by courts, according to the nonprofit group Public Citizen. Burke’s suit, which was against one of the lenders who had not settled, was dismissed in February.
Payday lenders are a modern-day scourge for poor folks. As Bazeldon reports, it is common for one loan to turn into a string of ten (or more!), and for interests rates to soar as high as 500 percent. A number of states have banned payday lenders, but the lenders are able to get around the law by affiliating with out-of-state banks. Lawsuits have been effective in reining in the worst excesses of these lowlifes, but now they’re unavailable as a policy tool. What to do?
Obviously, the poor need far better access to low-interest loans and good credit markets. Most importantly, they need more money — and we need to help them make a lot more of it via a higher minimum wage, monetary and fiscal policies that create a full-employment economy, and making it easier to join a union, to name just a few of the most important items on the policy agenda.
But in the struggle for social justice, lawsuits also play an important role, which is why the Court’s actions in this case, as in so many others, is so deeply troubling. As Bazeldon notes, only the Supreme Court can reverse one of its rulings. However, she also reports that Senator Al Franken has introduced a bill to bar mandatory arbitration. That is an excellent idea, and I hope he gets somewhere with it. I notice that Franken has also taken a leading role opposing the Comcast-Time Warner merger. It looks to me like he’s playing smart politics. If the Democrats could re-invent themselves as the pro-consumer party in American politics, that would be an excellent thing. Currently, American politics lacks a party that is strongly and consistently pro-consumer.
I’ll close with these thoughts from New York University law professor Arthur R. Miller, who is quoted in Bazeldon’s article:
“This is all about access to justice . […] In a way it’s part of a class struggle. We are privatizing justice to the point the rich can afford it and every one else can’t.”