The Damage of Debt

46 Pages Posted: 7 Nov 2014 Last revised: 8 Nov 2014

See all articles by Katherine M. Porter

Katherine M. Porter

University of California - Irvine School of Law

Date Written: March 1, 2012


In the consumer protection context, most research on American families assesses the extent of harm from overindebtedness along a single dimension: debt, or its kissing cousin, wealth. This essay examines the limitation of this analytical approach and argues that unmanageable debt may harm families’ well-being in ways that cannot be captured by financial measures. This critique may be particularly apt in the context of fringe lending, which often consists of small dollar loans that do not register as measurable harms using traditional metric of dollars of debt to assess harm. Drawing on the poverty economics and its concern with human capabilities, I make a parallel between the limitations of income to assess the harms of poverty and the limitations of debt to assess the harms of borrowing. I construct a multidimensional framework for studying the nonfinancial harms of debt that examines how borrowing may alter people’s preferences, endowments, and access to social opportunity. I apply these concepts to the existing research on the nonfinancial harms of overindebtedness and suggest new avenues for empirical research. A richer framework for assessing the damage of debt will improve the regulation of the consumer credit markets by providing policymakers with information on the nonfinancial harms of borrowing.

Keywords: consumer debt, endowments, poverty measurement, consumer bankruptcy, personal bankruptcy

JEL Classification: A13, D10, D18, G28, I32, K29

Suggested Citation

Porter, Katherine M., The Damage of Debt (March 1, 2012). Washington and Lee Law Review, Vol. 69, No. 2, 2012; UC Irvine School of Law Research Paper No. 2014-55. Available at SSRN:

Katherine M. Porter (Contact Author)

University of California - Irvine School of Law ( email )

401 E. Peltason Dr.
Ste. 1000
Irvine, CA 92697-1000
United States

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