Can equality be bought with a loan? Congress seems to believe so. For at least the last fifty years, Congress has articulated a legislative policy premised on the conviction that by democratizing access to borrowed money, including conventional loans and purchase money, marginalized groups, like women and African Americans, can buy their way to increased socioeconomic inclusion, better relative economic health, and even first-class citizenship.
In this regard, Congress has valorized the act of borrowing money, embracing the proposition that equality can be bought with a loan.
It has treated the ability to borrow money as an unqualified public good, duly capable of and appropriate for mitigating socioeconomic inequality for marginalized groups.
This “borrowing-as-equality” policy, as I call it, is undermined by data suggesting that women and African Americans, among other marginalized groups, continue to struggle at a group level when it comes to socioeconomic parity notwithstanding greater access to credit.
More than that, the disproportionate burden and corrosive work of overwhelming debt is a significant factor in this outcome, even as markers of equality like income remain significantly gendered and raced.
Thus, the increased ability to borrow money, cast as a mechanism of positive social change, may function in some ways as a Trojan horse, wheeling in the unique dangers of indebtedness to the front gates of marginalized communities and threatening their already tenuous socioeconomic existence.
Although the mechanisms that result in this state of affairs are undoubtedly complex, a key, underrecognized aspect of the problem is Congress’s disjointed approach to its borrowing-as-equality policy. Specifically, Congress has largely bifurcated its regulation of “credit” from its regulation of “debt.”
As an essential matter, however, credit and debt are quantumly entangled, given that a loan is comprised of both credit and debt.
Nevertheless, Congress has curiously disconnected its regulation of credit and debt, acoustically separating them—to borrow Professor Meir Dan-Cohen’s classic phrasing
—in ways that assume credit can meaningfully function as a mechanism of enhanced socioeconomic capacity separately from its complement, debt. Moreover, this bifurcated approach exhibits tension in its relatively optimistic and expansive posture in the treatment of credit as compared to its relatively negative and restrictive treatment of debt.
Specifically, beginning in the mid to late 1960s and continuing throughout the 1970s, Congress passed a suite of laws aimed at addressing inequality more broadly by improving the ability of marginalized groups to borrow money in the conventional consumer capital markets.
Significant among these interventions were the Higher Education Act of 1965 (HEA), which made it easier for financially constrained students to borrow money for higher education;
the Consumer Credit Protection Act of 1968 (CCPA), which implemented a regime to make lending fairer through heightened transparency;
the Equal Credit Opportunity Act of 1974 (ECOA), which prohibited lending discrimination on the basis of sex and race, among other protected categories;
and the Community Reinvestment Act of 1977 (CRA), which encouraged conventional lenders to make loans in marginalized communities that had been historically excluded from mainstream consumer capital markets.
In passing these statutes, Congress acted in part to address the demands of marginalized groups who, in a world in which access to borrowed capital was increasingly synonymous with belonging, came to believe that equal access to conventional loans
and purchase money
was integral to their broader quest for equality and first-class citizenship.
Consequently, the HEA, CCPA, ECOA, and CRA are steeped in the notion that borrowing money is a social good, capable of addressing, at least in part, deeply embedded social pathologies like racialized and gendered socioeconomic exclusion and, more broadly, entrenched social subordination.
In embracing the notion that borrowing money is a universal social good, however, these statutes focus mainly on “credit” as a means of capacity, with little attention to “debt” and its consequences.
Instead, even while recognizing that increasing access to credit raised the specter of unmanageable debt, Congress addressed “debt” separately and without a complementary veneer of capacity in a set of contemporaneous laws: principally in the Bankruptcy Reform Act of 1978 (Bankruptcy Code), regulating the discharge of distressed debt,
and, to a lesser extent, the Fair Debt Collection Practices Act of 1977 (FDCPA), regulating the practices of third-party debt collectors.
More than just isolated in substance, the Bankruptcy Code and the FDCPA also evince a more cynical and suspicious approach toward borrowing, and more specifically borrowers, than the credit optimism implicit in the HEA, CCPA, ECOA, and CRA. For example, in its specific focus on debt, the Bankruptcy Code, as amended over time, has become increasingly restrictive and distrustful toward debtors,
while the FDCPA, by regulating only third-party debt collectors, allows loan originators to pursue otherwise restricted practices to collect debt.
Thus, in the context of these two debt-focused laws, Congress’s progressive views and optimism about the value and capacity of borrowing seem to fade away.
The existing legal literature has recognized the socioeconomic consequences of indebtedness on marginalized communities but has done so primarily in the context of the existing bifurcation of credit and debt.
These accounts and their suggestions for reform are important and vital, yet scholars have not addressed the tension that exists between Congress’s embrace of the reverie of credit as capacity and its separate and opposite treatment of debt. This Article fills this gap by surfacing Congress’s bifurcated approach—namely, treating borrowing money as a social good and owing money as a personal failure. It further demonstrates how this approach is in deep tension with itself if, first, one assumes that borrowing as equality is not meant to be a deliberately ineffective policy implemented to maintain the social status quo under the guise of credit opportunism and, second, one accepts that “credit and debt stand as an inseparable, dyadic unit,”
both invoking a singular relationship that in our market society is satisfied only by complete equivalence.
It argues that because credit and debt are “two sides of the same coin,”
the regulation of one necessarily implicates the regulation of the other. Accordingly, Congress’s bifurcated approach imperils its borrowing-as-equality policy because for marginalized groups, the optimism of credit as capacity seems to yield readily to the corrosive impact of debt.
Because debt affects marginalized groups disproportionately and more severely, its invocation as a source of equality and mobility may simply further entrench the very inequality it is offered to ameliorate. For example, the disproportionate incidence of educational debt among, and the particular burden of educational debt on, women and African Americans is instructive. Congress has long advanced the position that bor-rowing money for education can function well as a catalyst for equality, but the facts undermine this position: At the start of the 2020s, women and African Americans are drowning in student loan debt but have not made significant relative inroads in terms of income or wealth equality.
This Article argues that the bifurcation and lack of complementarity in Congress’s treatment of credit and debt undermine the potential of borrowing money to function as a tool of equality and mobility for reasons related to the deeper inequity that socially marginalized groups continue to experience.
Specifically, debt is not the universal catalyst of mobility and equality that marks Congress’s approach to its credit-specific borrowing-as-equality policy. Instead, debt itself often functions as a force of subordination rather than liberation, “justifying [collection] behavior that would otherwise seem utterly immoral,” undermining the social good ascribed to credit, and reproducing relationships marked by hierarchy.
Accordingly, because in articulating a borrowing-as-equality policy Congress is implicitly encouraging debt among marginalized communities, this policy should incorporate a complementary view of credit and debt that recognizes both the potential upside value of borrowing and the particular vulnerabilities debt creates for marginalized groups.
In other words, a progressive credit policy is necessarily limited when combined with a restrictive debt policy that does not account for how structural inequality meaningfully inhibits future cash flow and reinforces and exacerbates existing social inequality.
This Article proceeds in four Parts. Part I lays the groundwork for understanding both how Civil Rights and Women’s Rights activists came to view access to conventional loans and purchase money as a platform for equality and how, as a consequence, Congress turned to borrowing as equality in the 1960s and 1970s. Part II then maps the contours of Congress’s bifurcated legislative response, presenting its borrowing-as-equality policy, as evinced by the HEA, CCPA, ECOA, and CRA, on the one hand, and the Bankruptcy Code and FDCPA on the other hand. It uses the text and legislative histories of these statutes to demonstrate how, in turning to the democratization of conventional lending as a mechanism of increased equality, Congress merely invoked the capacity of “credit” without significant reference to debt. Meanwhile, Congress bifurcated its contemporaneous treatment of debt as though it is possible to invoke “credit” without its constant companion. Moreover, even as Congress treated credit optimistically in the HEA, CCPA, ECOA, and CRA, it took a relatively restrictive and regressive approach to its treatment of debt in the Bankruptcy Code and the FDCPA.
Part III offers an account of how this bifurcation is relevant to the socioeconomic status of marginalized groups, particularly with regard to their fraught economic and noneconomic experiences with debt. Considering women and African Americans as examples,
it first shows how, notwithstanding expanded access to loans and purchase money, in current times these groups remain among the most vulnerable when it comes to debt and have not realized meaningful relative advances in certain metrics of equality like income. It then marshals a burgeoning social science literature on debt to show how, more than just a purely economic menace, debt is especially dangerous for these groups in its capacity as an institution of social subordination that actively engages in hierarchy making and reproduction.
Part IV makes a set of prescriptive suggestions for meaningful change to borrowing as a formal policy for equality. First, it argues that in its proffer of subsidized borrowing as a means of equality, Congress should use unified terminology to better capture and convey a more realistic picture of the relative positive and negative aspects of borrowing. This means eschewing, both in discourse and legislation, the selective semantic use of “credit” to refer to borrowing money as a social good in favor of a more realistic representation of the future liability inherent in borrowing.
Second, to the extent that Congress intends the existing borrowing-as-equality statutes to promote both the economic and noneconomic welfare of marginalized groups, Congress should amend its procredit statutes to expressly account for the countervailing force of debt on the communities for whom the benefits of those statutes are intended. For example, Congress might add intrastatutory modification or discharge of violative loans rather than subjecting distressed borrowers to the collateral damage of a global bankruptcy filing. This type of statutory change would recognize that marginalized groups are going to struggle and fail dispro-portionately in the consumer credit market for reasons that have more to do with entrenched racism, sexism, and the like, and less to do with profligacy or lack of personal responsibility.
Finally, and most broadly, Part IV argues that any policy that invokes market-based borrowing as a social good must account for the embeddedness of credit and debt in the broader social context—a context that Congress’s current borrowing-as-equality policy seems to ignore.
All of the borrowing-as-equality statutes presented above are meant to work within the familiar public–private sphere that increasingly defines American social provision.
This approach, with its reliance on private actors to implement government policy, must acknowledge and wrestle with the ways in which private actors often contaminate attempts to engage in market-focused social change with their own biases and prior commitments to the status quo. Moreover, the profit motive similarly corrupts the appropriation of federal dollars to subsidize market-based social change by prioritizing shareholder value and profit margins over communitarian interests in meaningful social change. Thus, by essentially privatizing equality and social mobility through the subsidy of borrowing, Congress is encouraging the most vulnerable groups to invest in their own mobility and to fend for themselves in an imperfect capitalist society plagued by discrimination, raced and gendered hierarchy, and other socioeconomic pathologies that essentially limit the expected return on that investment. In attempting to harness the power of borrowed capital for social aims, Congress has an obligation to address the broader consequences of predictable failure in this context.