“Bad Decision” or “Designed Outcome”?
Reframing the Narrative in Consumer Protection Litigation
Every year, National Consumer Protection Week (NCPW) reminds us why consumer law exists in the first place: Markets are not neutral. They are often structured in a way where incentives, power and information matter the most. In courtrooms across the country — including here in South Carolina — a persistent narrative often surfaces in consumer protection litigation:
“They borrowed the money. They ran up the charges. They signed the contract. Therefore, they owe the amount the creditor claims.”
This framing reduces complex financial transactions to a moral judgment where the consumer made a “bad decision.” Case closed. But consumer protection law was never designed to reward hindsight morality. It was designed to regulate systems.
The “Bad Decision” Frame
In consumer debt defense cases — whether involving high-interest loans, credit cards, auto finance, rent-to-own agreements, or retail installment contracts — one recurring theme appears on the creditor side:
- The consumer chose to enter the transaction.
- The consumer received the goods or money.
- The consumer failed to pay.
- Therefore, the consumer should not “hide behind technical defenses.”
This framing is powerful because it appeals to personal responsibility, a value deeply embedded in American culture. We see just how deeply embedded when we hear judges echo this theme in the courtroom and lawyers embrace it in their arguments to the judge. Consumers themselves feel it as they internalize the repeated reference to their regrettable financial conduct.
But this framing assumes:
- Evenly matched bargaining power.
- Access to and ability to use information.
- Comparable financial sophistication.
- That the transaction was structured around mutual long-term performance.
Consumer protection law exists precisely because these assumptions are often false.
The “Designed Outcome” Frame
On the other side is a different lens that is grounded in economics, not morality. Many modern consumer financial products are structured so that:
- Profit is front-loaded.
- Fees and interest accumulate rapidly.
- Default risk is priced in.
- Short-term payments make the deal profitable even if the consumer ultimately fails.
In some industries, a creditor does not need full repayment over time to make the transaction worthwhile. A deposit, origination fee, or initial months of high interest may be enough to meet internal return targets. From this perspective, default is not always a surprise. It can be a foreseeable, statistically modeled outcome. The question then shifts from:
“Why did the consumer make that decision?”
to:
“Why was this product structured in a way that predicted failure?”
South Carolina’s Legislative Answer
South Carolina addressed this tension directly in the South Carolina Consumer Protection Code (S.C. Code Ann. § 37-1-101 et seq.). The Code does not assume that every signed contract is automatically enforceable simply because a consumer signed it. Instead, it requires, in certain contexts, that creditors consider a consumer’s ability to pay.
Section 37-5-108 addresses unconscionable agreements and unconscionable conduct. “Unconscionable” refers to consumer credit agreements, clauses or conduct that are so one-sided, oppressive, or unfairly surprising – often exploiting a consumer’s ignorance, infirmity, or lack of understanding – that they violate principles of equity and fairness. Courts are thereby allowed to void or limit the terms by refusing to enforce a consumer credit agreement, enforce the remainder without the unconscionable term, or limit the application of the term to avoid an unconscionable result.
Importantly, subsection (4) directs courts to consider specific factors when determining unconscionability. Paragraph (4)(b) focuses squarely on the creditor’s knowledge and the consumer’s ability to repay. It allows the court to consider whether the creditor knew or had reason to know at the time that the credit was extended that there was no reasonable probability of full payment by the consumer according to the agreement’s terms.
That language is significant. It moves the inquiry beyond whether the consumer signed the contract and technically defaulted by not paying, and instead questions what the creditor knew at the origination of the debt, whether the required repayment was reasonably probable, and if the transaction was structured in a way that anticipated failure on the part of the consumer. This is not an after-the-fact sympathy analysis. It is a contemporaneous underwriting inquiry embedded in statute. The legislature recognized that extending credit without regard to ability to repay can itself be unconscionable conduct.
The Cultural Divide in the Courtroom
Consumer protection litigation often exposes a deeper philosophical divide: is a contract a moral obligation, or a regulated instrument?
View 1: Contract as Moral Obligation
- A signed contract equals a promise.
- Breaking the promise equals wrongdoing.
- Enforcement maintains order and fairness.
View 2: Contract as Regulated Instrument
- Standardized consumer contracts are not freely negotiated.
- Structural incentives can undermine fairness.
- Courts must examine statutory safeguards beyond signature alone.
When judges and lawyers view consumer defenses as “technicalities,” they may overlook the fact that those defenses are legislative guardrails. Ability-to-pay provisions, disclosure rules, limits on fees, unfair trade practice standards — these are not loopholes. They are policy choices.
The Psychology of Shame
Another overlooked dimension is consumer shame. Consumers often say:
- “I know I owe it.”
- “I shouldn’t have signed.”
- “This is my fault.”
But consumer protection law does not ask whether someone feels regret. It asks whether the transaction complied with statutory safeguards. National Consumer Protection Week is a reminder that legal rights are not reserved for perfect decision-makers. They exist precisely because humans are imperfect decision-makers.
Risk Allocation: Who Bears It?
At its core, this debate is about risk allocation. Should the risk of nonpayment fall entirely on the individual borrower — even if underwriting ignored obvious inability to pay? Or should some risk remain with the professional creditor that designs, prices, markets, and standardizes the product?
The South Carolina legislature has answered:
Creditors cannot ignore a consumer’s inability to pay. The statutory requirements reflect an economic truth - when companies profit from predictable default, the creditor business model is functioning exactly as designed. Unfortunately, that design is not meant to work in favor of the consumer.
National Consumer Protection Week 2026: A Call to Reframe
As we observe National Consumer Protection Week 2026, perhaps the most important shift is not legislative, but is cultural. We should ask:
- Are we evaluating consumers through a moral lens instead of a statutory one?
- Are we assuming personal failure where structural design may be at work?
- Are we dismissing defenses that the legislature deliberately enacted?
Consumer protection law does not eliminate responsibility. It recalibrates it. It recognizes that in modern credit markets contracts are mass-produced with terms that are rarely negotiable, and incentives that can reward unsustainable lending. And when the law requires consideration of ability to pay, it is not excusing debt — it is regulating the designed outcomes to level the playing field toward fairness to the creditor as well as the consumer.
The next time a case presents itself where someone “borrowed the money and didn’t pay,” we might pause before labeling it a bad financial decision. The more probing question may be whether this was an isolated mistake, or the predictable result of a system built to extract value before collapse.
National Consumer Protection Week is not simply about avoiding scams. It is about understanding that consumer protection law exists because markets are powerful — and power requires boundaries. Sometimes, what looks like a bad decision is actually a designed outcome.
Susan Ingles
Senior Staff Attorney
Consumer Protection Unit Head
S.C. Legal Services
