Credit Scores, Lending, and Psychosocial Disability

INTRODUCTIONMany articles seek to identify the causes behind and possible remedies to the debt epidemic. Notably, Senator Elizabeth Warren's professorial scholarship empirically identifies complex socioeconomic factors that helped create the current deteriorated state of personal credit affairs in the United States.1 In doing so, Warren and others shine light on the detrimental impact that poor creditworthiness has on members of vulnerable populations such as women and racial minorities.2 We contribute to this research by providing an initial inquiry into the credit situation affecting individuals with psychosocial disabilities (formerly called mental disabilities or mental illnesses) and the harmful consequences to which they are often subjected by modern commercial credit reporting systems. We also raise, for the first time in legal literature, an analysis of the costs and benefits of financial inclusion, and suggest possible solutions for resolving this important socioeconomic issue.Credit scores have become a near-universal financial passport for meeting common personal needs such as employment, loans, insurance, and home and car purchases or leases. At the same time, horrific economic, emotional, and health consequences arise from low creditworthiness for some score-bearers and their families. Individuals with psychosocial disabilities can make disastrously poor financial decisions during the active phases of their conditions; during inactive phases they are as capable as others of making sound or poor financial decisions. Yet, in computing credit scores and selling credit reports, oligopolistic transnational credit reporting agencies (like Equifax) do not account for psychosocial disability. Worse, evidence demonstrates that businesses rely on these reports to predatorily target individuals with psychosocial disabilities-especially those who are also women and racial minorities-in deleteriously deciding terms of employment and housing.Discrimination based on disability status is prohibited by two civil rights statutes, the Americans with Disabilities Act3 ("ADA") and the Fair Housing Act4 ("FHA"), but no evidence suggests they have any impact on predatory lending. The United Nations Convention on the Rights of Persons with Disabilities5 ("CRPD"), which the United States has signed but not yet ratified, offers clues on addressing equal access to financial services, but leaves open the most crucial issues of how to empower such agency. To address this lacuna, we suggest and assess different avenues-including market approaches, government regulation, and non-governmental intervention-that could honor the discrimination-ending aspirations of these legal obligations as they relate to persons with psychosocial disabilities and their creditworthiness.By utilizing rights-based theory in conjunction with economic analysis, the Article stakes out a unique perspective within the developing disability rights canon addressing legal capacity (also called legal personhood) that mandates recognition of an individual's right to make financial (and other) choices for herself. The Article thereby contributes to a continuing and contentious global debate over how to balance the tension between autonomy and paternalism as these dynamics relate to persons with disabilities. Finally, as the first piece of legal scholarship to address the intersection of creditworthiness and psychosocial disability, we aim to provoke debate and scholarly exploration of an unaddressed but crucial issue within the field of credit scores, bankruptcy, and predatory lending.The Article proceeds as follows. Part I sets forth the history of commercial scoring and reporting of borrower creditworthiness. It then summarizes empirical findings on the typically harmful financial, health, and psychological consequences of low credit scores and bankruptcy on borrowers and their families. Section II.A demonstrates that persons with diagnosable psychosocial disabilities, much like other Americans, are capable of making both sound and poor financial decisions. …