"Price Discrimination" Discrimination

Credit price personalization, where lenders set prices based on individual borrower and loan characteristics, is a common practice across many loan types, with conventional accounts of its harms focusing on the ways in which risk-based pricing, or setting prices based on borrowers’ credit risk, can lead to disparities for protected groups like racial minorities and women. This Article examines an often-overlooked yet potentially harmful form of price personalization — charging borrowers different rates based on their willingness-to-pay, known as price discrimination — and argues that this practice can exploit vulnerable borrowers, including protected groups like racial minorities and women, by imposing higher costs unrelated to their credit risk, resulting in what I term “price discrimination” discrimination. Beyond entrenching financial disparities, price discrimination can exacerbate default risks, especially as the use of big data and artificial intelligence can make price discrimination more pervasive. Despite the potential risks of price discrimination for protected groups, the existing discrimination legal framework treats price discrimination categorically, as either entirely permissible or entirely impermissible, without providing clear or consistent criteria for when such practices are justified. In contrast, I propose a harm-based approach to addressing “price discrimination” discrimination, which evaluates the permissibility of pricing policies based on the extent of harm they cause. This approach considers two key factors: the magnitude of the disparities and the legitimacy of the pricing strategy. Focusing on these dimensions offers a more direct approach to addressing price discrimination concerns and aligns with the statutory framework prohibiting unfair, deceptive, and abusive acts or practices.