The Bully Model of Consumer Finance and Litigation

There’s a fearful symmetry in the consumer finance world. It’s a symmetry of bullies between overreaching financial institutions and plaintiff strike suits, as in both, litigation costs present a ceiling, under which there’s a license to overreach.

What does a bully do? A bully looks and acts tough and claims things to which s/he isn’t legally entitled. But as we all know, if you push back against a bully, the bully is likely to back down; the bully doesn’t actually want a fight. We see the bully model of consumer finance and the bully model of plaintiff litigation all too frequently. There’s no sense, however, that we’d be better off eliminating both. Instead, interest groups look to eliminate one or the other, when the larger problem is in our adjudicative system, which imposes significant costs and delays substantive rulings.

For example, a consumer finance company might deliberately overcharge a consumer or try to collect a debt that isn’t owed, knowing that in 99 out of 100 cases the consumer will just acquiese rather than fight back. Fighting back is expensive–it takes time and energy and, depending on how far things go, money. It isn’t worth spending an hour on the phone for a $5 overcharge, much less hiring an attorney. But from the financial institution’s perspective, it’s very cheap to tack on $5 to everyone’s bill and collect an extra $495 from every 99 consumers, while apologizing to the 100th who pushes back and cancelling the fee. As Office Space taught us, you can make a lot of money stealing a fraction of a penny at a time from a lot of people. Being a bully pays.

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