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Consumer Law

posted by Katie Porter

Credit Slips is a self-proclaimed blog about "credit, finance, and bankruptcy." Much of our discussion here focuses on consumer credit, which also makes up a large amount of what gets taught in law school courses on "consumer law." Jeff Sovern at St. Johns did a survey on the subject. And to understate things, the economy has provided significant fodder for discussions on consumer credit, including credit cards and mortgage lending, in the last decade, and so consumer law courses may increasingly be expanding coverage of credit or being replaced by seminars on predatory lending, the democratization of credit, the mortgage foreclosure crisis, etc.

I remain committed to "consumer law" as a broad field. While consumer credit is part of that, I believe there is a pedagogical value to teaching students about a wide variety of consumer-business transactions in a single course, and I believe there is theoretical coherence in consumer law as a field. An article in the New York Times, Airline Fees Test Travelers' Limits, nicely illustrates my thinking. The pattern of fee hikes, hard-to-discern terms, and complex pricing that the article documents in the airline industry is a pretty close parallel to the credit card industry in the last decade. The problems are fundamental to businessess--sophisticated repeat players aided by technology and expertise--selling things to consumers--relatively unsophisticated one-off players without technology or expert advice. For me, the most interesting question is trying to identify consumer-business transactions that don't exhibit the problems of these disparities. Those markets hold important lessons for the regulation of consumer credit that seems likely to occur in the next few years.


This reminds me of one of my favorite topics: the inadequacy of disclosure based regulation to truly solve consumer problems. For example, although the NYT article uses the phrase "inadequate disclosure" in two places, if you read it carefully, note that none of the specific examples they give involve inadequacy of disclosure. The fees all seem to be very specifically disclosed. I would not even call any of them "complex" - it's just that there are so many of them than there used to be. Many of the orthodox arguments for regulation - a wide disparity of information between the business and the consumer, or preventing externalities - don't seem to apply to the airline fee problem. But they are still really annoying!

It is like consumer credit as you say, - and also like taxes; it's not the disclosure, it's the extortion, that needs to be fixed, i.e., the number of times a large organization puts its hands in individuals' pocket and the disingenuous use of pretexts to rationalize what is simply greed and extortion.

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