Why “It Pays” to “Leave Home Without It”: Examining the Legal Culpability of Credit Card Issuers Under Tort Principles of Products Liability

This note examines the liability of credit card issuers and their role in creating high levels of consumer debt under the tort principles of products liability. This note is based on the underlying argument that credit cards are products knowingly designed and distributed to the pub-lic in order to take advantage of consumers’ cognitive and behavioral vulnerabilities and to encourage high levels of consumer debt. To make this argument, the author first examines state and federal legislation that has shaped the regulation of credit cards. The author also examines ju-dicial reactions to the legislation as well as the actions taken by credit card companies in response to these legal developments. After establish-ing this background, the author analyzes the liability of credit card issu-ers under a “defective design” theory of products liability. This analysis takes the reader step-by-step through an examination of how credit cards could be considered “products” as opposed to “services,” how the de-sign of credit cards as products are “defective,” and whether reasonable alternative credit card designs can make credit cards safer for consumers. The author highlights how the product defects at issue stem not from the physical card itself, but rather, from the terms and conditions of the cardholder agreements accompanying the cards. Additionally, the author defends his argument against two potential affirmative defenses that credit card issuers could raise to counter a design defect theory of liability. Finally, the author concludes that judicial adoption of a prod-ucts liability framework based on the notion that credit cards are defective products could effectively protect consumers and address the growing problem of credit card debt.

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