Predatory Politics: Race, Gender, Class and the Politics of Predatory Lending

• In Event: Economic Segregation, Arrests, and Predatory Lending

Abstract

Consumer financing has become a near ubiquitous feature of U.S. economic citizenship. And it hasn’t happened by accident; rather, the growth of consumer credit—both as a dominant industry and a key feature of Americans’ financial security—is the consequence of government policymaking. Despite federal policymakers’ century-long effort to expand access to financing, frequently in lieu of bolstering public welfare support, not all Americans have access to mainstream consumer banking and credit. And when they do, it frequently comes with predatory financing terms that can trap borrowers into a cycle of debt that further perpetuate economic inequality in the United States. Despite the centrality of consumer financing to the welfare of Americans—especially those on the social and economic margins, political scientists have only recently begun to explore the politics of this stratified system. This paper investigates the evolution of credit’s democratization and its consequences for the political behavior of historically marginalized borrowers.

The paper draws from archival records and historical legislative analysis to demonstrate how federal lawmakers chose to pursue a two-phase period of credit democratization in the 1970s and 1990s as a means of expanding the purchasing power of women, people of color, and eventually lower-income consumers while sidestepping contentious political battles over traditional welfare programs. The process ushered in an array of risky, potentially predatory credit products and terms, like subprime loans and high-interest, high-fee credit, that helped contribute to the deleveraging of American borrowers by the eve of the 2008 financial crisis. The paper further contends that this democratization of consumer financing produced feedback effects that demobilized these borrowers, limiting their incentives to demand political solutions to predatory lending. Using an original 1,500-person national survey, the paper shows how marginalized borrowers’ experiences with consumer lending and financial regulation teach them to blame market actors—including lenders and consumers—for both individual and systemic problems with credit, ultimately channeling their attempts to solve those problems toward the market in lieu of political mobilization. The paper further employs an original survey experiment to test whether advocacy appeals that prime government’s regulatory role as an issue of protecting economic security might help re-engage marginalized borrowers, thus improving the prospects for predatory lending reform.

Author

• Mallory E. SoRelle, Duke University