US: LI Activists, Libertarians Target Pension, Loan Abuses-Analysis

LI activists are at work to address the situation of ‘stealing candy from a baby’ contracts –often via forward loans–induced by current court and statutory practice.

In addition, in the US along with many pro-Libertarians they’re calling attention to the student loan crisis created by the fact that by statute they’re no longer discharged in bankruptcy–and are thus a peonage contract–of inflated college costs created by coercive government oligopolies that target state-licensed or common law lower cost colleges ( including in one case Federal officals instituting an attempt to make using an Oxford degree a crime in Florida).

Forward loans against paychecks and benefits such as pensions can be a great convenience. Unfortunately current statutes encourage abuses by:

  • Putting people in desperate situations through creating economic crises through e.g. current immigration restrictions, the war, etc.
  • Addressing abuses with a hammer by not allowing the loans or targeting innocent errors, and not allowing ‘under seal’ review/universal ‘cooling off’ periods as under common law
  • Making redress difficult by not extending matter to small claims courts or juries, restricting ease of bankruptcy/re-organization or homestead protections, or allowing wage/income garnishments–indeed, especially the US Federal government has extended such garnisments to an array of issues for its convenience from taxes to alimony payments to fines circumventing even the current lax judicial scrutriny in many places

These behaviors by officials create periodic and avoidable crises: Many people  become vulnerable and crooks induce them to sign improper  instruments that allow a seizure of assets–knowing there is little chance, given the complex and pricey system, that they will be called to account . Recently in the US, the Federal government encouraged this behavior with crooked officials and their cronies becoming enriched by loans incident to the economic crisis with complete impunity: The response has ( except for a few states) not to prosecute the offenders but demand new regulations that will ease the next round of gangsterism.

As a matter of Libertarian Re-Statement of Law: Our Libertarian reform treats all agreements not bonded by e.g. contracted bonds or collateral value ( e.g. contracts)  as revocable; no personal or ‘specific performance’ is allowed as tending to peonage and slavery except in brief emergency situations by sworn professionals ( e.g. a pilot, a priest, etc.) ; and re-affirms the natural law doctrine that contracts must be fair, e.g. equal as to power, understanding, clear and relevant to the matter, and not tending towards bizarre or ruinous consequences, or affecting patrimony: Homesteads and key operating ( Wildcard) funds could not be seized. –something widely ignored today by many courts which instead of laughing unfair contracts out treat them as a serious matter to show how busy they are or collude with dishonest corporate interests knowing they have no jury to answer to  ( as one judge said to me)…then where there is a public outcry the perpetrators quickly blame honest businesspeople who find themselves confused with actual crooks.

Let me say in passing several activists have been working on the most unfair ‘contracxts in the US: Medical services where you cannot get an open and clear price ( due to massive regulation) in our so-called ‘free market’ of medicine. You can see what a hamburger costs at McDonalds or a Lasik eye surgery which is not subject to price regulation–a stitch in your ear…who knows? Progressives in many cases and even in my experience most  conservatives –let alone economists–seem unable to grasp that where there is no market price, there is no free market and no actual agreement ( or way of managing the process, relating costs to ‘RE’ or ‘FTE’ estimate of resources needed and activity as any management consultant will happily tell you …for a fee).

Restoring fully this proper approach and expanding it is key: Problems are created by not allowing simple and free process to revoke unfair contract.

As a result many elderly or immature people have no ready recourse when talked into things beyond their capability or in some cases outright misrepresentation. Contracts under seal which implied condiderable review by family guardians such as an attorney, other responsible family members etc. have been progressively disused by courts. The correct natural law solution involves promoting:

  1. … simplified revocation including effective redress via small claims type procedures,
  2. …plain-language contracts with ‘under seal’ options/cooling off, and
  3. …common-sense limitations ( as already exist with some pensions) except in special circumstances to be determined locally,

…as the next steps. Most loans are innocent but LI activists have instituted a massive campaign to legislators and the press to address potential problems, encouraging restoring or normalizing procedures as expressed to protect against abuses intended or inadvertent, and head-off improper attempts to demonize these loans that allow people to obtain money in a manner they can handle.

LI activists have a lot of which to be proud…On a wider scale since 1969 we have pioneered the way towards:

  1. Simple, clear contracts coupled with widespread rights ( Libertarian platforms), and current statute citizen, education; legalizing consumer counseling clinics
  2. Removing impediments to self-designed or low-cost use of mundane agreements, attorney advertising, quality ratings by the public, etc.
  3. Encouraging eldercare statutes to restore common sense, for example, where family can have some say instead of expensive professionals

As a matter of Libertarian Management the proper approach is to segregate funds and resources –and stick with the plan. See Harry Browne’s books on the issue of fund segregation. Some US states and foreign jurisdictions make this somewhat easy in parts ( Florida), many don’t.

While the activists are at present looking mostly at the surge of secondary loans created by the crisis, let us remember that agrrements are revocable at will, and any contract that is unfair is null on its face in Libertarianism–and when done repeatedly an act subject to rehabilitative committment for misbehavior. I hope we will at least see some notice in the press soon, but don’t be discouraged if they get it wrong. In another generation or two we may see a judge rating system by the consumer who will tick off adherence to Libertarian standards to see if they indeed protect rights and justice, especially for the weak. This is a tough issue, and activists in China are adressing something similar where the corruption and collaboration of misguided officals is so overt it might as well be advertised. I thank those working on it via:

  1. E-lobbying and calls
  2. Starting consumer  info clinics/networks
  3. Addressing the issue at Libertarian Institute informationals.


E. Michelle Drake

Consumer Law Attorney
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As a general rule, people are bound by the bargains that they make. Strict application of this rule in today’s commercial society, however, may be unfair because companies hold all the cards when dealing with consumers.To level this playing field, courts will sometimes refuse to enforce consumer contract provisions that are unfair or unconscionable or impose reasonable limits on such provisions.An unfair contract term is generally a provision that puts the consumer at a disadvantage and that is not subject to negotiation. Typically, an unfair term is pre-written into a standard form contract (often in fine print) and is offered to the consumer on a take-it-or-leave-it basis.

These types of consumer contracts may include rental car agreements, cell phone contracts, cable/satellite TV agreements, mortgage agreements, gym memberships, and other types of form contracts.

Contract terms that indicate extreme one-sidedness in favor of the seller include provisions that limit damages against the seller, limit the rights of the consumer to seek court relief against the seller, or impose punitive penalties or fees on the consumer. In addition, contract terms may be unfair or unconscionable if they contain open-ended provisions that give the seller unilateral discretion to set or change terms relating to price or conditions of service, and the seller later abuses that discretion.

Many states have enacted laws that prohibit unfair or unconscionable contract provisions. As just one example, California’s Consumer Legal Remedies Act explicitly prohibits “inserting an unconscionable provision in the contract.” Cal. Civ. Code § 1770(a)(19). California more specifically prohibits businesses’ use of certain early termination fees when the fee imposed is actually an unlawful penalty.

In addition, several federal and state laws prohibit particular types of contract terms or impose limits on certain terms. Further, in most states, the terms of a contract (particularly a term that is left up to the discretion of the seller) are subject to a duty of good faith and fair dealing. Determining whether a particular contract term is unlawful can be complicated… .

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