Making Credit Safer

Abstract

Physical products, from toasters and lawnmowers, to infant car seats and toys, to meat and drugs, are routinely inspected and regulated for safety.Credit products, like mortgage loans and credit cards, on the other hand, are left largely unregulated, even though they can also be unsafe.Because financial products are analyzed through a contract paradigm rather than a products paradigm, consumers have been left with unsafe credit products.These dangerous products can lead to financial distress, bankruptcy, and foreclosure, and, as evidenced by the recent subprime crisis, they can have devastating effects on communities and on the economy.In this Article, we use the physical products analogy to build a case, supported by both theory and data, for com-

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