Consumer Law’s Equity Gap

This Article is about the views that shape and constrain the development of consumer law. Consider the market for short-term, highcost loans. Policymakers tend to justify intervening in these markets on inefficiency grounds (consumers exhibit present bias) and rarely on equitable grounds (these loans cost too much). Why? One recent explanation suggests that policymakers may focus on inefficiency because they believe access to credit is essential for social and economic development. In this Article, I offer an alternative explanation. The lack of equity in consumer law is not just a function of narrow conceptions internal to consumer law but the external view that the law should prioritize efficiency and ignore equity. The dominant rationale for this view is that redistribution through legal rules distorts economic behavior more than redistribution through an income tax. Here, I discuss the longstanding and recent critiques of this rationale and build on those critiques to show why it is a fundamental mistake to ignore distribution in consumer law. In particular, background legal rules shape consumer demand in individual markets. These background conditions may mean that seemingly irrational exchanges are, in fact, rational. An approach tethered to consumer preferences may struggle to justify altering the terms of rational exchanges. To overcome this problem, I suggest that we center distribution in the way we justify interventions and conceptualize solutions to problems in consumer financial markets. I detail what centering distribution in consumer law might look like and conclude by considering some objections to redistributive policies in consumer law