By Reed Branson
branson@gomemphis.com
October 18, 2002
JACKSON - The Mississippi House voted 77-35 Thursday to provide an extra measure of protection to banks and finance companies accused in civil lawsuits of predatory lending practices aimed at the poor.
The bill, which could be considered by the state Senate as early as today, caps the amount of money a jury could award a borrower who proves he or she was fraudulently charged too much interest, was tricked into refinancing the principle or sold unneeded insurance.
The bill is a compromise between the state's powerful banking lobby, which fears the solvency of many institutions is jeopardized by thousands of such pending claims, and many lawmakers who were uneasy with the concept of providing special protections for those who commit such practices.
"We have a crisis for the banks. I wish there was not a crisis, and I also admit to you it is a crisis that was self-inflicted," said state Rep. Ed Black mon (D-Canton), a lawyer who has won a $71 million verdict against one lender.
Blackmon, who said that verdict was reduced to around $50 million, also ultimately helped bankers craft the compromise approved in the House Thursday.
"The institutions involved in creating these situations are very valuable to the economy of the state and community," he explained, acknowledging to members that the proposed solution left few feeling good.
The House vote came on a day when prospects for broader limits on lawsuits against the business community dimmed. A House panel killed a second Senate proposal that would cap punitive jury awards at $5 million, and noneconomic damages at $500,000.
A senate panel killed House proposals to cap punitive damages at 10 percent of a company's net worth.
House Speaker Tim Ford (D-Baldwyn) warned that his membership is losing patience with senators and could soon vote to adjourn.
Senate President Travis Little (D-Corinth) was hopeful new legislation could be introduced. Lawmakers are expected to break for the weekend.
The banking bill's chances appeared brighter, carrying with it the support of the Mississippi Bankers Association. Lawmakers approved, but Gov. Ronnie Musgrove vetoed legislation during the regular session that placed far more strict limits on what borrowers could recover.
Under House bill 14, jury awards would be capped on a sliding scale, ranging from a $3,000 cap for $100 worth of fraudulent charges to a $60,000 cap for $10,000 worth of fraudulent charges. Attorneys fees could also be awarded, and lenders would forfeit the principle and double the amount of fees in question.
But many lawmakers were troubled to be providing any extra protections at all. Many noted that more wealthy people who might allege fraud on loans of more than $20,000 would not face the punitive damage caps.
"Somebody had decided there is a stopping point which the poor man can't go past. How do we explain that to our consciences?" asked Rep. Billy McCoy (D-Rienzi), who opposed the bill. "If a person borrows $1 million and aggrieves $1,000 worth of fraud, he still has the full potential for recovery. But not the fellow who lost $1,000 on a $1,000 loan?"