Opinion ID: 455766
Heading Depth: 3
Heading Rank: 2

Heading: Countervailing Benefits

Text: 79 The Commission recognizes that most business practices entail a balancing of costs and benefits to the consumer. Therefore the Commission will not find that a practice unfairly injures consumers unless it is injurious in its net effects. Policy Statement at 37. To make this cost-benefit determination, the Commission examines the potential costs that the proposed remedy would impose on the parties and society in general. In the present case, the Commission made the following assessment: 80 The potential costs of most significance in this proceeding include increased collection costs, increased screening costs, larger legal costs and increases in bad debt losses or reserves. Increased creditor costs generally would be reflected in higher interests to borrowers, reduced credit availability, or other restrictions such as increased collateral or down payment requirements. 81 49 Fed.Reg. at 7744 (footnotes omitted). 82 In weighing the costs and benefits of the Credit Practices Rule to consumers and the credit industry, the Commission first noted that the potential cost of eliminating HHG security interests and wage assignments is diminished by the presence of other remedies retained by creditors under the Rule. Creditor remedies unaffected by the Rule include the right to take purchase-money security interests which allow for repossession of the particular item purchased, to obtain a deficiency judgment or bring a suit directly on the debt, and to garnish the debtor's wages. 23 Thus, [t]he remedies subject to the rule must be evaluated in light of their more incremental contribution to deterring default or reducing other creditor costs given remedies that remain available. Id. at 7744-45 (emphasis added). 83 Of course, to the extent HHG security interests and wage assignments actually reduce creditor costs, consumers will theoretically benefit by the greater availability of credit at a lower cost. In short, the crucial issue before the Commission was whether prohibiting HHG security interests and wage assignments would decrease availability and increase the cost of credit to consumers and, if so, whether this cost was outweighed by the benefits of the Rule to the same consumers (the benefits being the avoidance of the harms incurred by consumers as a result of the use of HHG security interests and wage assignments). Based on record evidence, the Commission concluded that the Rule would have only a marginal impact on the cost or availability of credit, and that this marginal cost was clearly overshadowed by the much greater risks to consumers resulting from the use of HHG security interests and wage assignments. See infra pp. 985-988. Thus we find that the Commission satisfied the second prong of the three-part consumer injury test set out in its Policy Statement.