The Center applauds the California Court of Appeal’s decision this week in People v. Adir International (Curacao), affirming a win at trial for the California Attorney General’s long-running lawsuit against Curacao – a chain of department stores in Southern California and Arizona that has long preyed on low-income Latino immigrants. The Center, along with Public Counsel and Bet Tzedek, filed an amicus brief in the case.
The decision upholds the lower court’s ruling that a junk fee Curacao charged for a “credit protection” product violated California insurance laws; it also concludes that the product violated California’s Unruh Retail Installment Sales Act and reverses the lower court’s finding on that issue.
Curacao is a retail chain store based in Southern California that, since its inception in the 1980’s, has sold many of its goods through in-store credit or on installment plans. As the Court noted (and the Center’s brief emphasized), “Curacao’s core customers are recent, low-income Spanish-speaking immigrants who have poor credit or no credit history and so cannot get credit elsewhere.”
Curacao introduced an “optional” credit protection product called Adir Global Protection (AGP) that allows buyers, in the case of certain life events, to suspend or defer payments on their store credit without incurring late fees and harming their credit score. Yet for Curacao customers, AGP was not optional, and its purpose was to protect Curacao, not consumers. Indeed, Curacao often buried the product in its installment credit packages without obtaining customers’ consent.
After receiving numerous complaints about this predatory product, in 2017 the California Attorney General filed suit against Curacao challenging numerous practices including the use of AGP. The trial court ruled that the sale of AGP violated California’s Insurance Code, but was not a product covered under the Retail Installment Sales Act, which protects consumers from predatory retail loans. On appeal, the California Court of Appeal affirmed that Curacao had violated the Insurance Code, but reversed the trial court and held that AGP amounted to an unauthorized finance charge and therefore also violated the Retail Installment Sales Act.
The Center’s brief provided the Court of Appeal with context about the centuries-old history of predatory retail installment sales and legislative efforts to respond to that history. (See the Center’s initial blog post here). The brief provided background from the early 1900’s of unscrupulous door-to-door salespeople taking advantage of immigrants by enrolling them in predatory credit schemes and then initiating collection measures when consumers inevitably fell behind on payments. The brief then analyzed the legislative history of the Retail Installment Sales Act, which was enacted in the 1950’s to protect consumers from precisely the type of conduct that Curacao allegedly engaged in here. In its reasoning, the Court of Appeal drew on the Act’s legislative history to conclude that California’s lawmakers intended to prohibit businesses from tacking on fees like AGP to squeeze money out of customers.
“Curacao’s predatory business practices replicated and extended a painful history of targeting low-income immigrants with retail installment loans,” said Ted Mermin, executive director of the Center. “As the Court of Appeal held, the Retail Installment Sales Act was designed to protect Californians from precisely this kind of product. We welcome the Court’s decision and congratulate the Attorney General’s office for an important victory on behalf of particularly vulnerable consumers.”