New Frontiers in Fair Lending: Confronting Lending Discrimination Against Ex-Offenders

Abstract:     
The dramatic increase in the number of people leaving the nation's prisons and jails has contributed to a renewed interest in safe community reentry strategies. While issues surrounding housing, employment, and recidivism have dominated the scholarly landscape in this area, far less attention has been paid to those collateral consequences which affect ex-offender access to credit and financial services. For example, government financial assistance agencies and the private lenders that participate in government-sponsored lending programs routinely inquire into borrowers' criminal histories, and one federal court has held that criminal exposure bears a direct relationship to creditworthiness. In this article, Henderson weaves fair lending principles (as expressed in the Equal Credit Opportunity Act) with the goals of effective reentry policies and argues that despite the possible existence of a correlation between criminal exposure and likelihood of default, the use of criminal history in any determination of creditworthiness should be prohibited or at least curtailed. Given the practice's serious implications for both the ability of individual ex-offenders to reenter society effectively, as well as for the ability of receiving communities to effectuate crime prevention and community development initiatives, the author argues that the federal government ought to take the lead in developing statutory and administrative solutions that effectively fill the "advocacy gap" in credit and financial services where recourse to the courts is not available.

Number of Pages in PDF File: 35

Keywords: fair lending, ex-offender, reentry, credit, financial services

JEL Classification: E51, E21

Accepted Paper Series