Democracy DeclinedThe Failed Politics of Consumer Financial Protection

Democracy DeclinedThe Failed Politics of Consumer Financial Protection

Mallory E. SoRelle

Print publication date: 2021

ISBN: 9780226711652

Publisher: University of Chicago Press

Abstract

Borrowing has become the American way of life. We increasingly rely on consumer credit to purchase daily necessities and to weather unexpected emergencies. But borrowing to live is a double-edged sword: While access to credit can help people afford the American dream, borrowing also exposes them to high interest rates, fees, and mounting debt that can quickly turn into a financial nightmare. Despite this threat, policymakers haven’t put an end to predatory lending, borrowers haven’t taken political action to demand better financial protection, and consumer groups haven’t been able to change either trend—even after the 2008 global financial crisis. Democracy Declined argues that the failure to curb predatory lending through political participation is the product of a U.S. political economy of credit—a self-reinforcing cycle of policy development and subsequent policy feedback effects. Drawing on historical records, interviews, and original survey and experimental data, the book charts how federal policymakers embraced broad access to consumer credit to grow the national economy, motivating them to adopt consumer financial protections that safeguard that access. The resulting regulatory regime relies on information disclosures that teach borrowers to blame themselves and their banks for financial problems, minimizing people’s incentives to turn to politics to demand change. Compelled by the need to preserve credit access and without the countervailing force of voter mobilization, Democracy Declined explores how this feedback loop limits the prospects for meaningful consumer financial reform, threatening the economic security of American borrowers and the U.S. economy while exacerbating existing economic inequality.