The Consumer Financial Protection Bureau and the Federal Trade Commission contend that a Florida judge's decision in a case involving the Military Lending Act will undermine the ability of service members to get redress under the anti-predatory-lending law.
The two agencies wrote in an appeals court brief filed Monday that the legal standard applied by a lower court — in dismissing a lawsuit brought by a member of the armed services — would substantially curtail enforcement of the 16-year-old law.
"And it would circumvent Congress's judgment that allowing American service members to enforce their rights in court is essential to our national security," the CFPB and FTC wrote.
The lawsuit was brought by Emmanuel Louis, who was an Army private in December 2020 when he and his wife took a trip to a resort operated by a timeshare company called Bluegreen Vacations.
During the vacation, the couple was allegedly subjected to a nine-hour-long, high-pressure sales pitch. Louis and his wife eventually signed paperwork obligating them to pay $11,950 for membership in the company's Vacation Club, and to borrow money to finance most of the cost.
Under the Military Lending Act of 2006, lenders may not charge more than 36% interest on certain loans to active-duty members of the military or their relatives. The law also bans mandatory arbitration provisions in loans to service members.
The plaintiffs alleged that the Bluegreen Vacations loan misrepresented the interest rate, did not make certain required disclosures, and included a mandatory arbitration clause, all in violation of the Military Lending Act, and was therefore void.
But in May, U.S. District Judge Rodolfo Ruiz dismissed the suit, concluding that the plaintiffs did not have the standing necessary to sue. He pointed to a lack of evidence that the alleged violations resulted in any concrete harm to the plaintiffs. In other words, there was no evidence that the Louises would have acted any differently if Bluegreen Vacations had complied with the letter of the Military Lending Act.
"Notably, there is no indication that the required disclosures or the inclusion of an arbitration provision — both of which constitute the alleged MLA violations — impacted plaintiffs in any way," Ruiz wrote.
Last week, the plaintiffs appealed the decision to the 11th U.S. Circuit Court of Appeals, arguing that they did suffer harm.
"The Louises have shown a concrete injury — payment of money they do not owe. And the relief they request would remedy that harm: Bluegreen will be prohibited from collecting on the loan, return the payments it never should have gotten in the first place, and pay damages," lawyers for the plaintiffs wrote.
Bluegreen Vacations has yet to file its response to the appeal. But Grace Mead, a lawyer for Bluegreen, said in an interview that the district court judge found the company made clear all pertinent numbers that the Military Lending Act requires to be disclosed.
Regarding the arbitration provision that was included in the loan documents, Mead said the company never sought to compel arbitration, and that the plaintiffs got their day in court.
The CFPB and the FTC warned in their friend-of-the-court brief about the impact of accepting the legal standard that the district court judge embraced. They wrote that it may be very difficult, or even impossible, for members of the military to show that certain violations of the Military Lending Act had a direct effect on their decision to take out a loan.
As one example, they argued that it will be hard for plaintiffs to prove that they would not have taken out a loan were it not for the inclusion of a mandatory arbitration clause in the loan agreement.
"Absent such allegations, service members will be unable to bring suit," the two agencies wrote. "And creditors will have little incentive to ensure compliance."
Also filing a friend-of-the-court brief in the case, and siding with the plaintiffs, were various groups that represent members of the military and veterans. Those groups include the Military Officers Association of America and Blue Star Families.
They argued that if the district court's decision is not reversed, predatory lenders will again focus their marketing spending on active-duty members of the military. "That will result in a return to a time before the MLA, when thousands upon thousands of service members lose their security clearances or leave the military due to financial hardship stemming from predatory lending," the groups wrote.
CFPB Director Rohit Chopra
