Stephen Wilks


This Article examines two phenomena contributing to the racial stratification of consumers in credit card markets. The first phenomenon pertains to the longstanding conflict between card issuers and merchants over payment processing cost allocation. If successful, First Amendment challenges to existing statutory surcharge bans will allow merchants to impose an additional fee when consumers use credit cards as a form of payment. The Article relies on the interplay between socioeconomic class and behavioral theory to suggest subsistence borrowers would be more likely to pay surcharge fees than wealthier consumers. This arrangement disfavors the poor to support a hierarchy of borrowers, to the extent that income inequality continues to cleave along racial lines. The second phenomenon concerns algorithmic lending practices. Algorithmic lending practices use technology to effectively extend structural racism’s cumulative effects into the underwriting process. This Article argues that the algorithmic lending in modern credit card enrollment practices supports new and complex iterations of racial bias. Structural racism’s legacy married to modern data mining practices capture and compare the broad sweep of spending patterns among consumers with racially disparate spending power. Public law’s relationship to each of these two phenomena illustrates the government’s limited capacity to protect marginalized consumers from the racialized effects of cardholder stratification. The Article concludes by encouraging experts to refine underwriting practices to disentangle racism’s moral hazards from the legitimate business practice of equitable underwriting that determines a prospective borrower’s creditworthiness.



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