Expert to testify about Supreme Court's impact on consumer debt (6/12/2008)

U.S. Supreme Court rulings are digging into Americans' pocketbooks, contributing to staggering mortgage and consumer debt that now averages more than $53,000 for every man, woman and child in the nation, according to a University of Illinois legal expert.

Law professor Robert Lawless says pro-business rulings by the high court have saddled credit card users with whopping interest rates and fees, and left homeowners with little relief when they turn to bankruptcy court to avoid foreclosure and repossession.

Lawless, an authority on bankruptcy and financial services law, is scheduled to testify Wednesday when the Senate Judiciary Committee launches hearings on whether the court is favoring business and shortchanging consumers.

"This is not a partisan issue, not a matter of the justices … sitting in a room and deciding to be 'pro-business' or 'anti-consumer,' " Lawless said in written testimony that will be presented to the panel. "Instead, it is a simple fact of our political system that cases are going to end up in the Supreme Court where business interests will have systematic advantages."

Among other things, he says business has deeper pockets than consumers and also benefits from the "repeat player effect" - honing its arguments based on successes and failures in earlier cases.

On top of that, justices also generally lack a deep background in bankruptcy and financial services law, leaving them susceptible to the well funded, highly polished arguments of the industry.

A solution, Lawless says, is establishing rules that would require justices to lean toward consumers rather than business when interpreting ambiguous statutes dealing with credit, bankruptcy and other financial matters.

"Rules that tip statutory ambiguities in one direction or another are hardly unprecedented," Lawless said in his written testimony. "For example, the courts have a long tradition of resolving statutory ambiguities to avoid constitutional issues or resolving ambiguities in criminal statutes in favor of the accused."

He also says consumers can help by paying closer attention to cases before the Supreme Court that could affect their everyday lives, such as a landmark ruling that lets national lenders charge credit card interest rates that are higher than some states allow.

Awareness of the dry, often-complex financial cases has improved due to the Internet, but still flies well below the media radar, said Lawless, an author for Credit Slips, a popular blog devoted to current issues involving credit and bankruptcy.

"Our audience is still a specialized audience of persons who are particularly interested in the financial services issues we discuss," Lawless said in his written testimony. "On a good day, we reach a few thousand, while news coverage on the hot button social issues that reach the Supreme Court will reach millions."

Note: This story has been adapted from a news release issued by the University of Illinois

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