Reducing The Wealth Gap Through Fintech 'Advances' in Consumer Banking and Lending

49 Pages Posted: 8 Jun 2020 Last revised: 10 Jun 2020

See all articles by Pamela Foohey

Pamela Foohey

Indiana University Maurer School of Law

Nathalie Martin

University of New Mexico - School of Law

Date Written: March 1, 2020

Abstract

Research shows that Black, Latinx, and other minorities pay more for credit and banking services, and that wealth accumulation differs starkly between their households and white households. The link between debt inequality and the wealth gap, however, remains less thoroughly explored, particularly in light of new credit products and debt-like banking services, such as early wage access and other fintech innovations. These innovations both hold the promise of reducing racial and ethnic disparities in lending and bring concerns that they may be exploited in ways that perpetuate inequality. They also come at a time when policy makers are considering how to help communities of color rebuild their wealth, presenting an opportunity to critique policy proposals. This Article leverages that opportunity by synthesizing research about the long-term costs of debt inequality on communities of color, adding an in-depth analysis of several new advances in banking and lending, and proposing several key principles for reducing debt inequality as an input to the wealth gap.

Keywords: wealth gap, wealth inequality, income inequality, home loans, student loans, education loans, payday loans, alternative financial services, high-cost financial services, payroll cards, wage access programs, auto loans, car loans, auto title loans, public banking, consumer debt, consumer credit

JEL Classification: G20, G21, K20, K22, K36

Suggested Citation

Foohey, Pamela and Martin, Nathalie, Reducing The Wealth Gap Through Fintech 'Advances' in Consumer Banking and Lending (March 1, 2020). 2021 University of Illinois Law Review __ (Forthcoming), UNM School of Law Research Paper No. 2020-03, Available at SSRN: https://ssrn.com/abstract=3551469

Pamela Foohey (Contact Author)

Indiana University Maurer School of Law ( email )

211 S. Indiana Avenue
Bloomington, IN 47405
United States
812-855-1257 (Phone)

Nathalie Martin

University of New Mexico - School of Law ( email )

1117 Stanford, N.E.
Albuquerque, NM 87131
United States

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