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Wednesday, June 1, 2011

The Supreme Court's New Bank Bailout: Too Slippery to be Accountable

Faster than a TARP "stress test,” and maybe even more valuable, the Supreme Court’s latest handout to big business already has corporate defense attorneys scrambling to cash in for the lending industry. Banks, payday lenders, and others are now getting an unexpected bonus from the arbitration terms they’ve routinely slipped into consumer loan contracts for years: a bailout from paying back large groups of customers they’ve scammed.

While arbitration clauses have been part of the corporate defense strategy for some time, a California law kept judge and jury available to the state’s consumers in the form of a class action. Lenders couldn’t walk away from their biggest rip-offs. But in AT&T Mobility v. Concepción the Supreme Court invalidated that law based on the 1925 Federal Arbitration Act, a statute taken woefully out of time and context.

As The American Lawyer reports, within two weeks of the Supreme Court’s decision in Concepción high-priced litigation firms across the country rushed to the courthouse to “alert” judges about the ruling, or, perhaps more accurately, cash the check bearing Justice Scalia’s signature.

Dozens of class actions were in progress against banks and lenders when the decision came down. Even though the companies hadn’t tried to force these groups of customers into arbitration before, their lawyers now argue that the Supreme Court has given them a chance to wipe the slate clean.

In the pending cases, lawyers for the customers will argue the lenders have waited too long to try to force arbitration. In the next case, though, and the case after that, lenders will get off scot-free as the fine print on credit cards, home loans, payday advances, and most other consumer financial services swallows up the last real opportunity for everyday Americans to keep the industry accountable when it cheats them out of hard earned money.

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