On November 21, the Consumer Financial Protection Bureau (CFPB) and Federal Trade Commission (FTC) filed a joint amicus brief in Louis v. Bluegreen Vacations Unlimited, Inc., No. 22-12217 (11th Cir.) regarding servicemembers’ right to sue under the Military Lending Act (MLA).

The plaintiffs in the case were both covered borrowers under the MLA when they obtained a loan to purchase a vacation timeshare and paid a 10% down payment of $1,150 in addition to an administrative fee of $450. The plaintiffs allege the loan violates the MLA because it includes a mandatory arbitration provision, and there was no statement of the military annual percentage rate (MAPR). The MLA prohibits mandatory arbitration, 10 U.S.C. § 987(e), and the MLA requires that the MAPR must be stated before issuing a loan to a servicemember. 10 U.S.C. § 9877(c)(1)(A). The plaintiffs sought an order declaring the timeshare agreement void, rescission of the agreement, and restitution, as well as statutory, actual, and punitive damages.

Bluegreen Vacations Unlimited, Inc. (Bluegreen) moved to dismiss for lack of Article III standing under Federal Rule of Civil Procedure 12(b)(1) and, in the alternative, for failure to state a claim under Rule 12(b)(6). Bluegreen argued that the plaintiffs lacked standing because they had not suffered any concrete injury, and if they had, whatever injury they suffered was not traceable to the alleged MLA violations.

The magistrate judge in the trial court, the U.S. District Court for the Southern District of Florida, recommended the case be dismissed for lack of standing, reasoning that the plaintiffs had failed to establish any connection between their payment under the contract and the MLA violations. In particular, the plaintiffs had not alleged that proper calculation and presentation of the MAPR would have had any bearing on their accepting the contract. The District Court judge adopted the magistrate judge’s recommendation and dismissed the case, but the District Court’s reasoning slightly differed. The District Court held that there was no concrete injury, but otherwise agreed with the magistrate judge, opining that the two alleged MLA violations did not “impact[] Plaintiffs in any way.”

On appeal to the Eleventh Circuit, the CFPB and FTC argue, as amici, that the plaintiffs have standing because they made a substantial down payment pursuant to the contract that was void as a matter of federal law. They argue it is illegal to extend credit to covered borrowers on terms not in compliance with the MLA and that any such contract is void ab initio. 10 U.S.C. § 987(f)(3). If the contract is void from inception, Congress also intended “that the legality of the contract could be litigated in court and appropriate remedies awarded.”

Moreover, the CFPB and FTC argue the plaintiffs suffered a concrete injury because they made a down payment on the loan. They argue that economic injury has been long recognized by courts as economic injury sufficient for standing and “monetary loss obviously constitutes Article III injury.” They further argue plaintiffs’ injuries are traceable to the challenged conduct. In the CFPB and FTC’s view, the plaintiffs’ injury needn’t be directly traced to Bluegreen’s “procedural violations of the MLA” because, for standing purposes, their injuries may “flow indirectly from the action in question” (emphasis added), which is a “relatively modest” burden. According to their amicus brief, the plaintiffs’ injuries flow indirectly from the conduct in question because the contract’s violation of the MLA rendered it void, and payment on that void contract injured the plaintiffs. In other words, “plaintiffs’ economic injuries were the result of an illegal and void loan.” In the CFPB and FTC’s view, “[t]here is no requirement that [plaintiffs] show a nexus between their injuries and the particular violations that render Bluegreen’s conduct illegal.”

Finally, the CFPB and FTC argue that upholding the District Court’s ruling would undermine the remedial purpose of the MLA — protecting servicemembers from predatory lending — because Congress intended to allow servicemembers to bring suit to challenge contracts that violate the MLA and seek remedies.

The CFPB and FTC have highlighted that they intend to aggressively enforce the MLA and are taking action to protect servicemembers. Troutman Pepper will continue to monitor the legal landscape for updates regarding servicemember protections.