Regulating Excessive Credit

Abstract

Consumer financial protection law is dominated by ex-ante, contract-centered regulatory measures. But these measures largely fail to curb lenders’ incentive to lend beyond consumers’ ability to repay. Accordingly, this Article suggests a different approach: discouraging lenders from extending loans that cannot be repaid by dismissing the imprudent lender’s claims in consumer bankruptcy. I argue that regulation of underwriting decisions through bankruptcy is normatively desirable because it challenges the artificial separation between consumer finance law and consumer bankruptcy law. By this token, it may not only overcome the autonomy and effectiveness concerns attached to ex-ante consumer finance regulation, but also enhance the internal coherence of consumer bankruptcy law.