Predatory Lending, Passive Judicial Activism, and the Duty to Decide

Abstract

Since 1999, the North Carolina General Assembly has enacted a series of statutes designed to curb abusive practices in consumer mortgage lending, including the nation's first predatory lending law. These laws implicitly recognize that the practice of securitization has created incentives for predatory lending practices to develop in the home mortgage market. Against this financial and legislative background, the North Carolina appellate courts issued five decisions between 2003 and 2008 dealing with predatory lending issues.

This Article analyzes these five North Carolina decisions from two perspectives: first, as demonstrating the courts' evolving response to the widespread use of securitization, and second, as representing fundamentally different approaches to the courts' basic adjudicative duty. As explained in the Article, this adjudicative duty requires judges to reach decisions that respond to the parties' arguments with candor, respect guidance from the legislature, and are narrowly structured so that they do not unnecessarily preclude future legislative or judicial action on similar issues.

Based on an examination of the judicial duty to decide, the Article concludes that two of these five decisions, Shepard and Skinner, illustrate a form of passive judicial activism by using procedural doctrines to unnecessarily preclude future litigation and supplant the ability of the legislature to act in an area where it has expressed strong concern. Conversely, the remaining three decisions, Melton, Richardson, and Tillman, are narrowly decided and comply with the courts' adjudicative duty.

Keywords: predatory lending, judicial activism, adjudicative duty