As consumer credit and its attendant problems have exploded around the globe, consumer protection has been the dominant, if not exclusive, framework for mitigating risks to the consumer. Historically, consumer protection efforts in the consumer credit context have focused on “leveling the playing field” between debtors and creditors by preventing fraud and ensuring proper disclosure. Certain types of loans are now subject to substantive restrictions, such as the new Dodd-Frank regulations requiring mortgage lenders to ensure that borrowers have the ability to repay high-cost mortgages. Despite these important advances, some critical gaps remain. Predatory lending continues to be a significant problem. In addition, even in circumstances where there are effective disclosures and where predatory behavior is absent, consumers can find themselves financially distressed as a result of onerous debt obligations. In particular, the current approach does not effectively address situations in which a debtor’s desperation renders her willing to accept credit on whatever terms it is offered.
This Article suggests that a human rights framework can provide a complementary overlay to the consumer protection approach to consumer credit. Far from supplanting the consumer protection framework, human rights principles can bolster and complement consumer protection efforts. Human rights principles can establish a universal floor of protection that prevents a “race to the bottom” and that cannot be circumvented on economic efficiency grounds. I propose a specific example of a consumer credit regulation based on human rights: states should not enforce a consumer credit contract if, at the time of the contract, there was a substantial likelihood that the contract would render the debtor unable to meet her basic needs.