Trump judges require consumers harmed by “payday” loans to abandon class actions and settle individual claims: Confirmed judges, confirmed fears


Confirmed judges, confirmed fears“Is a blog series that documents the harmful effects of President Trump’s judges on the rights and freedoms of Americans. Cases in the series can be found here by issue and by judge shortcut.

Trump Ninth Circuit Judge Danielle Forrest, along with Trump Judge Lawrence VanDyke, overturned a district court ruling that consumers harmed by short-term, high-interest “payday” loans cannot classify fraud and related violations instead must at least first submit their individual claims for arbitration at the request of the defendant. The September 2021 decision was in Brice v Plain Green LLC.

As documented by the Consumer Protection Office (CFPB) and others, “payday” loans are high-priced loans to low-income borrowers with poor creditworthiness who often encounter questionable practices and subsequent financial problems. Although many states regulate payday loans through such methods as prohibiting exorbitant or “usurious” interest rates and other measures, limited liability companies and others who provide such loans have attempted to regulate them through methods such as the use of the internet and some technology avoid the “rent-a-tribe” in which “tribal shell companies that act as the front for non-Indian payday lenders charge borrowers exorbitant interest rates” and claim that they are governed only by tribal law, not national law Federal law. As a rule, loan agreements stipulate that all disputes must be settled individually by an “independent third party” on the basis of largely civil law proceedings. A number of California consumers have been harassed by these practices and have filed class action lawsuits against Think Finance LLC and its owners and investors, alleging the defendants used such tribal shell companies to obtain inappropriate payday loans at interest rates in excess of 400% each awarded year.

As in many such cases, several defendants attempted to drop the class action and force individual arbitration of each victim’s claims under an arbitration clause in the loan agreements. Following the appearances of most of the other courts to have examined such claims, the District Court denied requests to enforce arbitration. The defendants appealed.

In a 2: 1 ruling, Trump justices reversed Forrest and VanDyke, stating that plaintiffs were required to arbitrate each of their claims and that they could only bring a broader lawsuit if the arbitrators themselves decide that it is inappropriate to arbitrate the agreement to give them the question of whether the disputes are subject to arbitration. Based on their interpretation of the Supreme Court’s decisions on arbitration in cases where consumers are suing businesses, the Trump judges ruled that the provision in the agreement that the arbitration agreement is valid is “delegated to an arbitrator” and that the district court “Force the parties to initiate arbitration.” Only if the arbitrator comes to the conclusion that “the arbitration agreement is unenforceable,” Forrest continues, can consumers “go back to court” and seek further legal remedies.

Judge William Fletcher strongly disagreed. He noted that the majority vote contradicts “all of our sister circles who have dealt with the issue,” including the Second, Third and Fourth Circle, as they considered the delegation rule to be valid. On the basis of a careful analysis of these decisions, the rulings of the Supreme Court and the language of the loan agreements, Fletcher found that both the delegation provision and the arbitration agreement were invalid, especially since they acted as a “prospective waiver” of the borrower’s law, in the event of breaches of state and government law Appeal federal laws protecting consumer rights. Fletcher concluded that the effect of the Forrest-VanDyke ruling was “inappropriately forcing susceptible borrowers to arbitrate” even though other circles had “consistently condemned” such arbitration agreements, “including those issued by the same lenders as in used in this case ”. . “

As a result of the arrests of Trump Judges Forrest and VanDyke, California borrowers will therefore not be able to bring effective legal remedies against the inappropriate payday loan practices in this case, and a worrying precedent has been set that goes further than previous cases in forcing consumers to disputes with businesses resort to ineffective solitary arbitration proceedings. The case also demonstrates the need, as part of our struggle for our courts, to promptly ratify Biden candidates for the Ninth Ward and all of our federal courts in order to balance the views of such Trump judges and to adequately respect consumer rights. In fact, as explained elsewhere on this blog, President Biden recently submitted the nominations of three “highly qualified legal candidates” to the Ninth Ward to “restore our federal courts.”

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