On November 21st the Consumer Financial Protection Bureau (“CFPB”) and the Federal Trade Commission (“FTC”) filed a joint amicus brief in the Eleventh Circuit Court of Appeals. The brief is in support of the plaintiffs in Louis v. Bluegreen Vacations Unlimited LLC. (Case No. 22-12217, 11th Cir., 2022). In the case, the plaintiffs entered into a contract for a timeshare interest in a vacation property. At the time they entered into the agreement the plaintiff’s husband was an active military member, therefore, him and his dependent spouse were covered borrowers under the Military Lending Act (MLA).
The MLA grants extra protections and requires certain additional disclosures to military members and their dependents in lending transactions. It also provides that, in general, a person who violates the MLA with respect to any person is civilly liable to such person. In essence, the MLA provides a statutory private right of action to covered borrowers when the provisions and requirements of the MLA are violated in a lending transaction.
Plaintiffs alleged that defendant Bluegreen Vacations failed to provide them with an accurate calculation of the Military Annual Percentage Rate as required under the Military Lending Act and they argue that since the agreement contains a mandatory arbitration clause, a clause which is prohibited by the MLA, the contract was rendered illegal and void at its inception by the MLA under 10 U.S. Code § 987. Plaintiffs contend they suffered injury in the form of the monetary payments they have made under an illegal and void contract, they seek recission of the contract, renumeration of payments made, and declaratory relief that the contract was void at its inception.
Defendants argued that plaintiffs had no Article III standing to bring the suit since they suffered no injury by the alleged misconduct. To bring a suit before a federal court a plaintiff must first establish something known as standing, that is the plaintiff must show (i) that they suffered an injury in fact that is concrete, particularized, and actual or imminent; (ii) that the injury was likely caused by the defendant; (iii) that the injury would likely be redressed by judicial relief. TransUnion LLC v. Ramirez, 141 S. Ct. 2190, 2203 (2021). In this case, the district court ruled that the plaintiffs failed to allege any facts to plausibly establish any causal connection between their payments under the contract (the injury) and the challenged actions of the defendants (the MLA violations), further, they failed to allege any part of the injury is traceable to the MLA violations. Essentially the district court ruled that plaintiffs lacked Article III standing to bring the suit and that the conduct complained of (the violations of the MLA) amounted to nothing more than “a bare procedural violation, divorced from any concrete harm.” Louis at 9, quoting Spokeo, Inc. v. Robins, 578 U.S. 330,338 (2016) at 341. The district court then dismissed the suit for lack of standing.
Plaintiffs have appealed the dismissal on standing grounds to the Eleventh Circuit Court of Appeals. The CFPB and FTC have filed a joint amicus brief in that circuit on behalf of plaintiffs arguing that plaintiffs have established standing since the contract was void at its inception under the MLA and therefore any payment on the contract is an injury and the injury is connected to the conduct since it’s the complained of conduct that voided the contract and established the injury. The brief argues that Congress expressly authorized a private right of action to enforce violations of the MLA under the act and requiring strict standing requirements of injury and causality will often be difficult for individual covered borrowers to establish, eroding the very rights congress expressly granted.
The outcome of this case is likely to have significant implications on the availability and enforceability of a private right of action for violations of the Military Lending Act, at least in the Eleventh Circuit. A ruling in favor of plaintiffs will establish the private right of action under the MLA whereas a ruling in favor of defendants would take much of the teeth out of the MLA as it would, in practical effect, leave enforcement of the MLA’s provisions up to regulatory agencies over individuals.