Congress Looks to Judicial Overrides to Strengthen Consumer Protections

The underutilized tool would allow Congress to void SCOTUS rulings that insulate lenders from regulation.

The U.S. Supreme Court in Washington, D.C., U.S., on Tuesday, April 20, 2021. President Biden is asking congressional Democrats to vote for a tax increase that will test a long-held liberal article of faith: that many wealthy Democrats won't mind paying more in taxes if they can be convinced the money would lead to greater prosperity for everyone. Photographer: Stefani Reynolds/Bloomberg via Getty Images
The U.S. Supreme Court in Washington, D.C., on April 20, 2021. Photo: Stefani Reynolds/Bloomberg via Getty Images

In a unanimous decision last Thursday, the U.S. Supreme Court issued a ruling that would limit the ability of the Federal Trade Commission to seek monetary relief for borrowers who have been defrauded by corporate lenders. Under the new ruling, the FTC would only be allowed to pursue restitution in the form of injunctions, not cash payments, for customers who have fallen victim to deceptive practices like short-term or payday loans.

“An uncertain impending Supreme Court decision on the FTC’s 13(b) authorities has given scammers new opportunities to take advantage of people, including those who are isolated at home due to the pandemic,” said House Energy and Commerce Committee Chair Frank Pallone Jr. and Consumer Protection and Commerce Subcommittee Chair Jan Schakowsky in a joint statement two days earlier. Lawmakers announced that they planned to amend the FTC’s founding legislation, which would preserve its ability to seek financial redress under section 13(b), regardless of what the court decided.


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By clarifying its intent in the FTC statute through the proposed amendment, called the Consumer Protection and Recovery Act, Congress would effectively override the Supreme Court’s more limited interpretation. With a simple tweak to the legislative text — which can pass on an individual basis or as part of an omnibus package — a so-called judicial override can address or eliminate whatever ambiguity the Supreme Court found within the law, thereby nullifying the court’s decision. As The Intercept and The American Prospect wrote last year, this congressional option has the potential to counteract a conservative-leaning court and toss out dozens of harmful rulings.

And the proposed FTC legislative fix is not the only judicial override Democratic lawmakers are pursuing. Last week, the House Financial Services Committee, chaired by Rep. Maxine Waters, marked up an omnibus package known as the “Comprehensive Debt Collection Improvement Act.” The legislation beefs up a number of consumer protections, ranging from limits on how debt collectors can harass consumers electronically (sponsored by Rep. Ayanna Pressley, D-Mass.) to new restrictions on entities that collect medical debt (sponsored by Rep. Rashida Tlaib, D-Mich.).

A seemingly obscure bill included in the package, introduced by first-term Rep. Jake Auchincloss, D-Mass., seeks to challenge a 2019 Supreme Court case that limited the rights of consumers in nonjudicial foreclosure states. (Nonjudicial foreclosure means lenders do not have to go to court to repossess your home. According to the legal blog Nolo, 30 states and the District of Columbia use nonjudicial foreclosure, including Auchincloss’s home state of Massachusetts.) The bill would classify any business involved in foreclosure in a nonjudicial foreclosure state as a debt collector, thereby subjecting it to the rules and protections of the Fair Debt Collection Practices Act, or FDCPA. It’s Auchincloss’s first bill in Congress.

The bill would override a decision the Supreme Court reached in 2019, when it heard a dispute between a man named Dennis Obduskey and a law firm that declared it was foreclosing on his Colorado home. Obduskey challenged the proceedings under the FDCPA, alleging the firm failed to verify his debt, as required of debt collectors under federal law.

In Obduskey v. McCarthy and Holthus LLP, the nation’s high court sided unanimously with the law firm, affirming that in a nonjudicial state the firm would not qualify as a “debt collector” under the FDCPA. But in her concurring opinion, Justice Sonia Sotomayor said she felt this was a “close case.” She explicitly noted that “today’s opinion does not prevent Congress from clarifying this statute if we have gotten it wrong.”

Auchincloss, a former Republican who succeeded Joe Kennedy’s seat in Congress, took her up on that invitation. His bill proposes that Congress simply strike language from the FDCPA that currently, at least in the eyes of the Supreme Court, limits the definition of “debt collector.”

“The bill is extremely important to help curb harassment and abuse,” said Andrea Bopp Stark, a staff attorney at the National Consumer Law Center. She noted that judicial foreclosure states are already better for consumers “by giving them due process rights to either defend the foreclosure or bring affirmative claims [about the foreclosure] in court.” In nonjudicial foreclosure states, individuals have fewer rights to begin with — which makes protecting them under the FDCPA all the more crucial.

While foreclosure defense lawyers have insisted there are workarounds to Obduskey, reinterpreting the statute would be the simplest way to restore protections for people on the brink of foreclosure. And with the Consumer Financial Protection Bureau proposing to ban foreclosures until 2022, the timing would allow months for borrowers and foreclosing attorneys alike to adapt to the bill’s intended changes.

The Comprehensive Debt Collection Improvement Act — the omnibus package that contains the bills from Auchincloss, Pressley, and Tlaib — has been moved out of committee and will now proceed to consideration by the full House. The House hearing on the Consumer Protection and Recovery Act, the FTC Act amendment, is scheduled for Tuesday at 11 a.m. And last week, four FTC commissioners urged Congress to pass a legislative fix and reaffirm their agency’s power to provide consumer redress.

Despite being relatively easy to use and representing an important check on judicial power, these statutory overrides have fallen by the wayside in recent years. In November, The Intercept and The American Prospect identified dozens of statutory rulings that Congress could address with a simple tweak to the law and encouraged lawmakers to take advantage. They may at last be getting the message.

“The Supreme Court’s decision last week strikes at the very heart of the FTC’s mission to protect and provide relief to consumers,” Pallone said in a statement to The Intercept. “Now it is up to Congress to come together to restore these critical authorities so that the FTC can continue its vital work protecting American consumers, and that’s exactly what we intend to do.”

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