The Development of Consumer Protection Law, the Institutionalization of Consumerism, and Future Prospects and Perils

Publication year2010

Georgia State University Law Review

Volume 26 . „

Article 2

Issue 4 Summer 2010


The Development of Consumer Protection Law, The Institutionalization of Consumerism, and Future Prospects and Perils

Mark E. Budnitz

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Budnitz, Mark E. (2009) "The Development of C onsumer Protection Law, The Institutionalization of Consumerism, and Future Prospects and Perils," Georgia State University Law Review: Vol. 26: Iss. 4, Article 2. Available at:

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Mark E. Budnitz*


This article examines major developments in the laws that regulate consumer financial services beginning with the Federal Truth in Lending Act (TILA) that took effect in 1969.1 Dramatic changes have occurred both in the law and in industry products and practices over the forty years covered in this survey. Some have benefited consumers, while others have not. The current economic crisis has brought renewed attention to the adequacy of these laws and their enforcement. Understanding the context within which consumer law has evolved will better prepare policymakers to make sound decisions when considering improvements to it.

Part I describes the lack of consumer protection law and lawyers before 1969. The few consumer organizations that existed were not focused on consumer financial services. Part II traces the birth and infancy of consumer protection law. That Part includes an

* Bobby Lee Cook Professor of Law, Georgia State University College of Law. The author thanks his past and current research assistants, Miltonette Craig and Elizabeth Lewis, for their contributions to the article. The author also is grateful for the support of the College of Law.

1. Arguably, the first federal consumer protection statute was the Wheeler-Lea Amendment of 1938 that clearly established the Federal Trade Commission's authority to protect consumers from unfair and deceptive acts and practices. Pub. L. No. 447, 52 Stat. Ill (1938); Michael M. Greenfield, Consumer Transactions 53 (2009); Donald P. Rothschild & David W. Carroll, Consumer Protections: Text and Materials 59 (2d ed. 1977). In addition, the states had a variety of usury laws regulating interest rates and retail installment sales acts requiring disclosures. greenfield, supra, at 2. One commentator described the chaotic state law situation this way: "These laws combined in a complex tangle of independent, noncomprehensive, and noncoordinated regulation within any one state, with the pattern varying from one state to the next." Paul A. Mondor, Lock-in Laws: Adding More Patches to the Mortgage Lending Quilt, 37 Cath. U. L. Rev. 543, 545-46 (1988). The focus of this paper, however, is on federal statutes and regulations that provide consumers with a private right of action, which the FTC Act does not do. Greenfield, supra, at 99. For a brief description of the events leading up to enactment of TILA, see Robert J. Hobbs & Stephen Gardner, The Practice of Consumer Law: Seeking Economic Justice 10-11 (2d ed. 2006).



explanation of how the federal anti-poverty program resulted in the first consumer protection lawyers as well as an analysis of the Truth in Lending Act, state legislation, Supreme Court cases, and the role of federal administrative agencies. Part III describes how consumer protection law was undermined starting with the Reagan administration. Part IV describes the lack of significant developments during the presidencies of the George H.W. Bush and Bill Clinton, as well as the major setbacks that occurred while George W. Bush was president. Part V examines the challenges of the 21st Century, including developments in technology and the obstacles posed by mandatory arbitration.

During the forty years covered in this survey, consumers have continued to face severe problems, and the consumer financial services industry has never slowed its promotion of new practices consumers regard as unfair and deceptive while opposing stronger consumer protection law and enforcement. Given the vast disparity of resources between individual consumers and the industry, the continued viability of efforts to promote consumer protection law is a major concern to those who believe stronger laws and enforcement are essential. Part VI examines the keys to the survival of those efforts. It describes consumerism and its role as a movement for social change and law reform as a means to realize social change. It also describes the development of a permanent organizational structure for engaging in litigation as well as legislative and regulatory advocacy. Part VI contends that consumerism has become institutionalized and its values have become embedded in society's values, better ensuring its survival.

Part VII turns to the present, exploring the prospects for continued development of strong consumer protection law and the perils such progress faces. It does this by analyzing the Credit Card Act of 2009 and President Obama's proposed Consumer Financial Protection Agency Act.


I. The Way We Were: Life Before Consumer Protection Law

Before passage of the Truth in Lending Act in 1968, there were no federal laws regulating the consumer financial services industry that provided consumers with a private right of action.2 State laws were inadequate.3 There were few, if any, lawyers whose practice was primarily protecting consumers.4 Law schools offered few, if any, courses devoted to consumer law.5 No consumer organization produced continually updated manuals for lawyers taking consumer cases or regularly scheduled conferences at which those lawyers could learn from experienced consumer attorneys and network with others.6 No organization regularly represented consumers in Congress or before administrative agencies.7 The Federal Trade Commission (FTC) was ineffectual.8

This lack of activity was not the result of consumers living in an environment devoid of major consumer problems. Major issues included the following: state-assisted seizure of consumer property through pre-judgment repossession and garnishment;9 assignees of

2. Adam Goldstein, Why "It Pays " to "Leave Home Without It": Examining the Legal Culpability of Credit Card Issuers Under Tort Principles of Products Liability, 2006 U. ILL. L. REV. 827, 834-35 (2006) (noting TILA's inclusion of a private right of action).

3. Barbara A. Curran, Trends in Consumer Credit Legislation 3 (1965) ("Enactment of legislation relating to credit arrangements has not followed the pattern of expansion of the market. Regulation has been devised on an ad hoc basis to take care of problems and abuses or to clarify relationships as the need for such regulation became apparent....").

4. Dee Pridgen, Consumer Protection Law 5-6 (2004); Tang Thanh Trai Le, Protecting Consumer Rights § 1.06 (1987).

5. An indication of the presence of consumer law courses is the publication of casebooks for use in those courses. Among the earliest the author has identified are Homer Kripke, Consumer Credit: Text-Cases-Materials (1970) and David A. Rice, Consumer Transactions (1975).

6. In 1982 NCLC began producing what has grown to a seventeen-volume series that is continually updated. See. e.g., Jonathan Sheldon & Constance G. Brigham, repossessions (1982) (exemplifying one of the first volumes in the series); see Hobbs & Gardner, supra note 1, at 20.

7. The Consumer Federation of America was established in 1967 for the purpose of representing consumer interests before Congress and federal agencies. See Hobbs & Gardner, supra note 1, at 1011.

8. Edward F. Cox, Robert C. Fellmeth & John e. Schulz, The "Nader Report" on the federal Trade commission (1969); Report of the ABA Commission to Study the Federal Trade Commission [July-Sept.], antitrust & trade reg. rep. (BNA spec. supp.) No. 427 (1969).

9. The facts in Fuentes v. Shevin, 407 U.S. 67 (1972) (prejudgment seizure of property) and Sniadach v. Family Fin. Corp., 395 U.S. 337 (1969) (prejudgment wage garnishment), illustrate how these creditor remedies subjected consumers to deprivation of property absent an opportunity for a hearing at a meaningful time.


consumer paper immunized from consumer claims and defenses through the holder-in-due course doctrine;10 abusive debt collection practices;11 credit discrimination;12 excessive interest rates;13 lack of warranty protection;14 fraud;15 breach of the peace when creditors resorted to self-help repossession;16 and cross-collateralization

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provisions. Low income consumers were targeted.

There were few consumer organizations and they did not devote resources to protecting consumers using financial services. The National Consumers League was established in 1898.19 It


investigated working conditions. Consumers Union was formed in 1936. For many years its efforts were primarily devoted to consumer testing.22 Probably the first successful grassroots consumer organization was the Consumers Education and Protective

10. Kurt Eggert, Held Up in Due Course: Codification and the Victory of Form over Intent in Negotiable Instrument Law, 35 creighton L. Rev. 363, 367 (2002) (describing how assignees working with creditors were protected from consumer claims by the holder in due course doctrine).

11. Matthew W. Ludwig, Abuse, Harassment, and Deception: How the FDCPA Is Failing...

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