1. Perez v. United States, (1971)
2. Facts: Perez was a loan shark. He was convicted under Title II of the Consumer Credit Protection Act which was a federal law prohibiting extortionate loan activities. The Act was passed by Congress pursuant to findings that 1) organized crime is interstate in nature, and 2) a substantial part of the income for organized crime is generated by extortionate loan activities, thus, loan sharking is an instrumentality of interstate commerce, even where individual transactions are purely intrastate in nature.
3. Procedural Posture: Perez challenged his conviction on the grounds that the Act was unconstitutional as being an impermissible exercise of the commerce power by Congress.
4. Issue: Whether Title II of the Consumer Credit Protection Act, as construed and applied to Perez, is a permissible exercise by Congress of its powers under the Commerce Clause.
5. Holding: Yes.
6. ∏ Argument: The Act is unconstitutional because it exceeds the limits of the commerce power contemplated by the framers of the Constitution. It infringes on the States’ police power of their own intrastate crime activities. Loan sharking is a local activity, not an interstate activity.
7. ∆ Argument: Since loan sharking is a substantial revenue generator for organized crime, and organized crime is a nationwide problem that uses interstate commerce as a conduit to conduct illegal transactions, loan sharking affects interstate commerce and is thus able to be regulated by Congress. The States are not able to deal with this problem individually, the federal government needs to provide tools to deal with the problem on a nation-wide level.
8. Majority Reasoning: The majority accepted Congress’ findings on the relationship between loan sharking and organized crime, and the effect of organized crime on interstate commerce. They stated that the commerce clause reaches protection of the instrumentalities of interstate commerce, which included the policing of organized crime. Citing to Darby, the court reasoned that it was permissible for Congress to regulate a class of activities without proof that the particular intrastate activity that was thereby controlled had an effect on commerce. It was proper to consider the “total incidence” that the class of activities had on commerce, rather than to try to carve out exceptions for individual occurrences of the activity that were not proven to be directly related to commerce. Even if individual transactions of loan sharking were completely local in nature, as a whole, they comprised a threat to interstate commerce because of their relation to the interstate activities of organized crime.
9. Dissent Reasoning: Conviction for loan sharking under the federal law should require proof that the individual was actually involved in interstate activities. Otherwise, a purely local problem would be regulated by the federal government, contrary to the States’ police power. Loan sharking is only a national problem in the sense that all crime is a national problem. There is no distinguishing factor about loan-sharking that lends itself to being a threat to interstate commerce per se.
