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By Amy Bizar, Fred H. Miller, and Alvin C. Harrell*
As reflected in this year's Annual Survey of Consumer Financial Services Law (Survey), which is the twentieth such survey published in The Business Lawyer,1 1997 was another important year in the development of consumer financial services law, as befits an area of law that seems to be at a crossroads with regard to some fundamental governing principles. For thirty years, developments in this area of law have been driven in significant measure by the premise that increasing federal regulation and mandated disclosure is necessary to protect consumers in consensual transactions. This approach has allowed advocates of a regulatory solution to promote a detailed regulatory system, focused on (though not limited to) mandated disclosures, while leaving largely intact the state law foundation of traditional common law principles of contract and property law. It has been a politically expedient arrangement that has served consumers, lawyers, and the industry well in general, despite a widespread belief that the resulting paperwork is confusing, burdensome, costly, often ineffective, and an engine for unnecessary litigation.
As we approach a new century, there are indications that the compromises of the past thirty years may have reached the limits of their usefulness. Regulatory advocates seem increasingly dissatisfied with a system of disclosures founded on freedom of contract; the entire notion of consumer contracts as a valid basis for legal rights and remedies is being questioned more frequently than in the past.2 Thus, substantive limitations on freedom of contract and statutory penalties unrelated to actual damages are increasingly in vogue in some quarters. On the other side of the debate, advocates of contract law seem less inclined to accept further limits on freedom of contract and they increasingly object to statutory penalties unrelated to damages in consensual transactions. Many on both sides seem to agree that the disclosure regime has reached or passed the limits of its effectiveness and that further disclosure requirements would be counterproductive.3
The resulting debate is currently centered on efforts to reform the two most important substantive laws governing consumer sales and secured transactions: the Uniform Commercial Code (U.C.C.) and the Bankruptcy Code. The first of these is the focus of this Introduction, and the second will be discussed later...