may find rejection with formal lenders.129 Moreover, how can one compare a product he or she
does not understand, against another complex product he or she does not understand? In the same
vein, such borrowers lacked the financial know-how to develop critical questions and seek
clarification.130 Even when these borrowers did ask questions, they lacked the skills necessary to
determine if the answers given were truthful or accurate.131 Unfortunately, using the previous
hypothetical, the result of all the sub-prime lending was that a large number of cars on the
highway all crashed simultaneously. When the housing bubble burst, many Americans poured
expendable income into their mortgage payments, another poor financial choice when evidence
pointed to an inability to sustain paying in the long term.132 When that was not enough, millions
of homes went into foreclosure and the economy contracted.133 Unfortunately, as many
Americans lost their homes, they continued to make poor financial decisions that rippled through
B. Lack of Financial Knowledge and the Contraction of the Economy
The impact of financial illiteracy spread beyond Americans losing their homes; the 2008
recession was driven deeper as many Americans continued to make unsound and short-sighted
financial decisions. When people lost their homes to foreclosure, buyers became afraid to
purchase new or existing homes or could no longer afford to, causing the construction industry to
languish.134 The money people poured into trying to save their homes resulted in less money
friends, and community members who are long-term homeowners and from whom they can seek out mortgage advice.”); see also The
Fair Credit Reporting Act and Issues Presented by Reauthorization of the Expiring Preemption Provisions: Hearing Before the S.
Comm. on Banking, Housing, & Urban Affairs 108th Cong. 560 (2003) (statement of Travis Plunkett, Legis. Director, Consumer
Fed’n of Am.), available at 2003 WL 21744953 (discussing the market for subprime borrowers).
Secondly, with the advent of ••risk-based pricing•• in the last decade, the way that credit is granted in this
country has changed dramatically, but information provided to consumers under the FCRA about the nature of
these loans has not kept up with this change. These days, a consumer with some credit blemishes is much more
likely to be offered a higher-cost loan with less favorable terms than to be denied a loan. Misclassification as a
high-risk, sub-prime borrower because of a credit report error or incomplete reporting by a furnisher (creditor)
can cause consumers to pay tens or hundreds of thousands of dollars in higher interest rates.
129 RUSSELL, supra note 128; Austin, supra note 67, at 1227-31.
130 Dinwoodie, supra note 24, at 195-201.
In addition, financially illiterate borrowers were less able to spot issues where clarification was needed, and less
able to formulate questions since they did not have a good understanding of the home buying process,
mortgages, and financial terms and concepts. The ability to ask challenging and probing questions also helps
borrowers protect themselves. Financially illiterate borrowers are more susceptible to predatory lending, fraud,
and abuse. Virtually all experts agree that there would be less predatory lending if borrowers were more
Id. at 199.
132 Alan Dunn, When Foreclosure Is a Good Option, U.S. NEWS (Sept. 29, 2010), http://money.usnews.com/money/blogs/my-
money/2010/09/29/when-foreclosure-is-a-good-option (analyzing the reasons Americans fought so hard to keep their homes and
explaining why sometimes foreclosure is the better choice).
133 Dinwoodie, supra note 24, at 191-92.
134 RUSSELL, supra note 128, at 10; see also Alan Zible, Home Construction Down; Potential New Foreclosures Could Hurt Housing
Industry Further, CHRISTIAN SCI. MONITOR (Jul. 21, 2010), http://www.csmonitor.com/From-the-news-wires/2010/0721/Home-
construction-down-potential-new-foreclosures-could-hurt-housing-industry-further (discussing the impact of foreclosures on the
Home construction plunged in June  to the lowest level since October, the Commerce Department said
Tuesday. Driving the decline was a more than [twenty] percent drop in condominium and apartment
construction, a small but volatile portion of the housing market. Construction of single-family homes, the
largest part of the market, was essentially flat.