For the past half decade or so, we’ve been fed the narrative that American consumers are the “little guy” in the ongoing battle between big, bad Wall Street and hardworking, proud Main Street.
Consumers have played the role of David to financial institutions’ brawny, uncaring Goliath. Against all odds and with few weapons other than persistence and morality, consumers have achieved phenomenal success in bringing the callous and profit-obsessed financial services industry to its knees.
The king is dead. Long live the king.
It’s difficult to argue that the financial services industry didn’t have at least some of this coming to it, and we’re not about to start. Justice for years of abuses and avoidable mistakes made in the name of profit has been a long time coming, and is hard earned. Millions lost their homes and/or their savings because of factors well beyond their control. Millions more didn’t have to.
So it’s right for the financial services industry to be forced to atone for the sins of its past. But that’s no reason to continue believing every action taken today is a sin, too.
A recent decision in favor of small Liberty Bay Credit Union is a perfect example. After a borrower declared bankruptcy, Liberty Bay took them to court to try and recover some of its money back.
And it won.
Years ago, in a more normal world, this might not have signified much. But we’ve reached the point in 2012 where the script has largely been flipped as a result of the past five years of bruising bank vs. consumer battles. Once the David figure in this ongoing war, consumers have slowly grown into Goliath, bloated by self-righteousness and emboldened by a political environment that seemingly panders to their every whim.
That a financial institution would have the gall to take on this Goliath at all in this kind of setting might suggest some kind of lunacy on their part.
But Liberty Bay isn’t crazy. It simply understood its rights under existing bankruptcy law – rights that seem to have been abdicated long ago by its contemporaries, in fact if not in law.
If we’ve said it once, we’ve said it a thousand times: “Caveat emptor” isn’t a dirty phrase. Much of our economy is built on the principle that consumers are ultimately responsible for the consequences of their purchases – not vendors.
The law clearly states that student loan debt is largely unforgivable in bankruptcy cases. And so Liberty Bay simply went after what it was entitled to – roughly $4,500 in funds used as a student loan by the consumer in question.
That Liberty Bay pursued the case largely on principle – its legal fees exceeded the amount that was ultimately recovered – may cause consumer groups to cry foul, arguing the case was a fruitless exercise and an unnecessary prosecution of an already troubled borrower.
But we think the opposite. Liberty Bay did have to go after what it was owed, if only to prove to itself and its peers that it still could, that laws do still exist that protect financial institutions, and not just the consumer
These days, the customer is still indisputably the king. We’re not advocating for that to change, per se.
But every king’s subjects have rights, too. And exercising those rights shouldn’t come as a surprise. Why have those rights, after all, if you’re afraid to use them? That makes the king more of a dictator, and in our democracy, that just doesn’t fly.
So score one for the new “little guy.”