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Credit Scores, Lending, and Psychosocial Disability

62 Pages Posted: 18 Apr 2016 Last revised: 16 May 2016

Christopher P. Guzelian

Thomas Jefferson School of Law

Michael Ashley Stein

Visiting Professor, Harvard Law School; University of Pretoria Faculty of Law, Centre for Human Rights

H. S. Akiskal

University of California, San Diego (UCSD) - Department of Psychology

Date Written: December 15, 2015

Abstract

Credit scores have become a near-universal financial passport for Americans to meet common personal needs including employment, loans, insurance, and home and car purchases or leases. At the same time, Elizabeth Warren and others have documented the horrific economic, emotional, and health consequences of low creditworthiness for score-bearers and their families. Individuals with psychosocial disabilities (previously called mental disabilities or mental illnesses) 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, national and transnational credit-reporting agencies (like Equifax) do not account for the implications of psychosocial disability. Worse, evidence shows that businesses rely on these reports to predatorily target borrowers with psychosocial disabilities — and especially those who are also women and racial minorities — in deciding terms of lending, employment, and housing. In theory but not in practice, the Americans with Disabilities Act and the Fair Housing Act each prohibit discriminatory financial decisions arising from disability status, while also requiring reasonable accommodations to equalize opportunities for disabled persons. The United Nations Convention on the Rights of Persons with Disabilities (which the United States has signed) further mandates enabling the financial decision making of these individuals, but does not provide guidance on achieving this obligation. Further, despite the crucial and direct implications this situation also raises for vast numbers of Americans without psychosocial disabilities who likewise make poor credit decisions, it has not undergone legal analysis. We engage this significant gap by suggesting schemes drawn from historical and comparative contexts that could enable the creditworthiness of persons with psychosocial disabilities, and then critiquing the costs and benefits of each. In doing so, we proffer the first analysis of this issue in the legal literature and seek to stimulate future dialogue among academics and policymakers. The Article concludes with thoughts on the implications of its analyses for the broader issue of credit scoring.

Keywords: Credit Scores, Loans, Lending, Mental Disability, Psychosocial Disability

JEL Classification: K39

Suggested Citation

Guzelian, Christopher P. and Stein, Michael Ashley and Akiskal, H. S., Credit Scores, Lending, and Psychosocial Disability (December 15, 2015). Boston University Law Review, Vol. 95, p. 1807, 2015; Harvard Public Law Working Paper No. 16-16; Thomas Jefferson School of Law Research Paper No. 2765649. Available at SSRN: https://ssrn.com/abstract=2765649

Christopher P. Guzelian (Contact Author)

Thomas Jefferson School of Law ( email )

1155 Island Ave
San Diego, CA 92101
United States
619-961-4248 (Phone)

Michael Ashley Stein

Visiting Professor, Harvard Law School ( email )

1585 Massachussetts Avenue
Austin Hall 305
Cambridge, MA 02138
United States
617-495-1726 (Phone)

University of Pretoria Faculty of Law, Centre for Human Rights ( email )

Private Bag X20
Hatfield 0028
Pretoria
South Africa

H. S. Akiskal

University of California, San Diego (UCSD) - Department of Psychology ( email )

9500 Gilman Drive
La Jolla, CA 92093-0109
United States

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