Adminization: Gatekeeping Consumer Litigation
Abstract: Large companies and debt collectors frequently file unmeritorious claims against consumers. Recent high-profile actions brought by the Consumer Financial Protection Bureau (CFPB) against JP Morgan, Citibank, and large debt collectors illustrate the breadth and importance of this phenomenon. Due to the limited financial power of individuals, consumers often do not defend against such baseless claims, which results in the entry of millions of default judgments every year. To combat this problem, policymakers and scholars have explored a variety of solutions that would make it easier for consumers to defend in court, but these prove ineffectual. To solve the problem of unmeritorious claiming, this Article proposes a budget-neutral solution called “Adminization.” This novel approach uses an administrative agency, the CFPB, as a gatekeeper to civil litigation which screens out baseless claims. The main task of the agency is to select a sample of cases, audit them, and—where needed—issue fines. The sampling of cases for audit could rely on machine-learning algorithms—the same ones used by credit card companies to monitor fraud today—to effectively focus the agency’s attention. The audit will use agency investigators to gather and corroborate information relevant to the debt claim, and where wrongdoing is found, the agency will use its powers to fine abusive plaintiffs. Under this system, every plaintiff is subject to the risk of thorough investigation and large fines, thus undercutting the financial incentive to engage in wrongful behavior. The importance of this contribution lies in its cost-effectiveness, practicality, and political feasibility relative to “participation-based” approaches that dominate the discussion today.