Contracts’ Empire and Our Broken Political Branches

Dave Hoffman has posted on his Substack about the Consumer Financial Protection Board’s ill-fated Regulation AA. He characterized the regulation as doomed from the start and analogized the CFPB to Ozymandias, the ancient “King of Kings,” who demanded, “Look on my Works, Ye Mighty, and despair!”

In Ozymandias, these were the words below the colossal statue honoring the eponymous king, but Shelley’s poem transforms the words into a reflection on the contrast between human frames of reference and the deeper, structural forces of the longue durée . The phrase has an amazing plasticity. I recite it regularly while grading final exams and when my Jenga tower falls. I would have invoked it when Typepad shut down and twenty years of blog posts disappeared, but nobody could look on my works and despair, until they were magically restored thanks to the good people at LexBlog. I intone the phrase with passion and with irony, knowing I am no King of Kings.

Professor Hoffman threw down the gauntlet, inviting my disagreement in a Bluesky post, and as I indicated in a response in that despair-filled forum, I find much to admire in the post. I have some critical observations, but I will begin with areas of agreement.

But first, here is Professor Hoffman’s recap of the ambitions of Regulation AA

• First, it would have codified and extended the FTC’s longstanding Credit Practices Rule across all covered financial providers, banning coercive credit remedies like confessions of judgment, wage assignments, and pyramiding late fees. 
• Second, it would also have newly prohibited three categories of boilerplate across consumer financial products more broadly: clauses that waive substantive state or federal consumer-protection rights or remedies (unless a statute expressly allows waiver), clauses that let firms unilaterally change material contract terms, and clauses that restrict consumers’ lawful speech—such as gag clauses, retaliation via account closure, or penalties for criticism or political or religious expression.

Professor Hoffman points out, as he has done in a number of contexts, that calls for legal reform should not run on vibes. Quite justifiably, he notes that the CFPB did not have an empirical basis for many of its actions. It admitted as much:

• “The CFPB is unaware of any comprehensive data quantifying the number of disputes that are deterred by the terms and conditions that would be prohibited at baseline”’;
• It also had no data evidencing “the extent to which the terms and conditions that would be prohibited reduce dispute resolution costs at baseline”;
• It lacked data on “the incidence of prohibited clauses,” “the incidence of the use of prohibited clauses under baseline,” and “the effect on consumer behavior induced by the inclusion of prohibited clauses”; and
• “The CFPB does not have systematic data that would allow for the quantification of the incidence of these terms in consumer contracts nor their actual use in financial relationships.”

Professor Hoffman also diagnoses the sources of this kind of executive overreach much as I would. Congress doesn’t do its job. Someone has to act, so executive agencies do so. He also, in my view, correctly assesses the expected fate of Regulation AA. It was passed near the end of the Biden Administration, and there was no expectation that it would go into effect once the transition to the Trump Administration occurred. Moreover, given the Supreme Court’s hostility to overreach by administrative agencies, even had the Trump Administration not intervened, the courts would have struck down Regulation AA as exceeding the CFPB’s authority, most likely under the major questions doctrine.

So much for common ground:

What motivated the CFPB to build its regulatory empire, knowing that it would crumble to dust not in geological time but almost immediately? Professor Hoffman concludes that the CFPB elected to compete in the attention economy rather than the real one. Hmmm. People with Substacks shouldn’t throw brickbats. But seriously, I don’t think that’s what the good people at the CFPB thought they were doing.

My theory, based on nothing but hunches, is that they were committed to their view of the right regulatory path, and they took it, hoping it would somehow survive. Even if it didn’t, it could provide a model for future regulators or legislators on state or federal levels. As we noted in an earlier post, state click-to-cancel laws still function even though the FTC’s click-to-cancel rule was put on hold. The International Law Commission drafted a statute for an international criminal court on the eve of the Cold War, knowing it would not come into being. Fifty years later, it did. The ILC’s work was not in vain.

Professor Hoffman also raises questions about the agency’s democracy deficit. It’s a valid point, but as I have argued repeatedly in out-of-the-way places, the rhetoric of accountable political branches seems pretty divorced from our political reality. Since the courts have now blessed partisan gerrymandering, including racial gerrymanders posing as partisan gerrymanders, it is more accurate to say that our representatives pick us rather than the other way around. Legislators do not legislate. They pass omnibus legislation that they do not read in advance and do not draft. These days, almost all legislative initiatives come from the Executive Branch, and many do not involve the legislature at all, as they come in the form of Executive Orders. There are certainly problems with regulatory overreach, but it sticks in my craw when people talk about unelected and unaccountable agency officials or judges, ignoring the fact that nobody elected the legislative aids, lobbyists, and White House lawyers who draft our laws.

Finally, I think Professor Hoffman and I differ on the extent to which things need to be empirically quantifiable before they count as legal harms. He is also more skeptical than I am of the dangers of boilerplate contracting. Regulation AA seems to me to follow directly from Peggy Radin’s work on Boilerplate. She convinced me of the seriousness of the problems she diagnosed with boilerplate contracting — democratic degradation and rights deletion. And no, I am not being inconsistent when I, on the one hand, defend the administrative state from accusations that it suffers from a democracy deficit and, on the other hand, endorse Professor Radin’s view that boilerplate degrades democratic practices. She argues that boilerplate agreements replace legal protections achieved through democratic processes and embodied in legislation approved with bipartisan support with one-sided terms dictated by private actors. One can regret the loss of democratic accountability in our political branches and still cherish the past achievements of democratic processes.

In an ideal world, I agree with Professor Hoffman’s conclusion:

But resources are limited, and harms may not be quantifiable or even economic.

You can stop reading here, as I’m about to go off on a pop culture tangent.

I am watching Pluribus. I am also thinking about the Borg episodes on Star Trek. In Pluribus, the wholly unlikeable and miserable protagonist, Carol, played by Rhea Seehorn (below), resists joining the collective.

Why?

The members of the collective seem content. They are cheerful, all-wise, caring, and loving. They cannot lie and will not intentionally harm a living thing. They conserve energy and give companionship to animals. Carol, by contrast, is selfish, wasteful, bitter, and she has dedicated her life to writing fantasy novels that she knows are schlock. She has contempt for her readers and for herself. Ozymandias indeed.

While the members of the Borg collective lack the good manners and charm of the Pluribus collective, we learn from a captive Borg, Hugh, that the members of the collective are content. They are habituated to the gentle hum of the voices of others and are not locked within the prisonhouse of their own tortured thoughts. Together, the Borg achieve what individuated species cannot.

And yet, we do not want to be part of the Borg collective.

Because the Borg are gnarly and violent, it is easy to understand why individuated species resist them. We cherish our freedom and individuality. It is harder to understand why Carol resists in Pluribus. But you don’t have to think about it long. At one point, she steals a Georgia O’Keeffe original and hangs it in her home in place of a reproduction she had of the same painting. At first, one is outraged at Carol’s norm-breaking, but one quickly realizes that it doesn’t matter. Although the collective knows everything there is to know about human creation, it has no interest in it beyond mining human knowledge to serve its biological imperative. Nobody is going to visit the museum; nobody is going to appreciate O’Keeffe’s painting or really anything. The collective knows that there is beauty. When Carol takes her appointed companion, Zosia, to a New Mexico plateau and marvels at the beauty, Zosia agrees, but does she experience pleasure at natural beauty? It’s not clear that she does. After all, Zosia enthuses hyperbolically over Carol’s latest fiction, which even Carol knows is trash.

And so, yes, what I’m saying here is that purveyors of boilerplate contracts are the Borg; they are the collective. They achieve certain efficiencies, but they impose their wills on us, overriding our laws and negating our individuality. Regulation has its costs, but not those costs. And we must resist the purveyors of boilerplate terms to preserve something beyond economic benefits. Ideally, we should do so by democratic means. But if Carol and some incredibly dogged, determined, and infuriatingly stubborn Paraguayan are the only paths to saving our souls, so be it.

Nothing beside remains.