Combat Abusive and Predatory Lending
A small rant
Predatory (Definition): of, relating to, or practicing plunder, pillage, or rapine b : inclined or intended to injure or exploit others for personal gain or profit [predatory pricing practices].
I was just reading an article in the paper about this lady Washington that was supposed to get a $970 refund, but ended up paying $300 in fees to the tax preparer. The interest rate on her loan came to 135.7% on an annualized percentage basis. I am a big proponent of capitalism and free enterprise, but that number is just obscene. Unfortunately, I think that this is just another sign of the polarization of America. The haves and have nots has turned into the have access to credit and the don?t have access to credit.
Subjected for your review:
THE PAYDAY LOAN INDUSTRY takes advantage of people that can least afford it. As mentioned above, I am a firm believer in free markets and no one forces any of these people to take the loans. Nevertheless, even the most ardent supporter of free markets could condone the morality of some of these operations. Just take a look at this article from the Consumer Federation of America:
Payday Lenders Shred Consumer Safety Net
Washington, D.C.-Payday loan companies not only take a bite out of consumers' pocket books with loans that cost 470% annual interest and are due in full on payday. Payday lenders are shredding the consumer protection safety net meant to safeguard needy borrowers who have no bargaining power in the predatory small loan market.
Payday lenders took a bite out of state interest rate and usury protections by lobbying for safe harbor legislation in 27 states. Payday lenders rent bank charters in hopes of claiming the bank's right to export favorable home state interest rate laws. Federal bank regulators are cracking down on rent-a-bank misuse of bank charters as a safety and soundness risk to banks. This year, the Comptroller of the Currency ordered Eagle National Bank to stop making payday loans with Dollar Financial Group check cashers and filed charges against Peoples National Bank of Paris, TX. go here for the full article
In addition to the problem shown in the payday industry, the same can be said to a lesser extent in the residential loan market. According to The Brookings Institute study: Access to Financial Services in the 21st Century: Five Opportunities for the Bush Administration and the 107th Congress by Michael Barr. Several opportunities to combat predatory lending were identified:
- Strengthen and Implement New Regulations on High-Cost Mortgage Lending
- Hold Lenders Liable for Mortgage Broker Abuses
- Bolster Consumer Financial Education
- Enhance Competition for Lower-Income Consumers Among Prime Lenders
- Increase Scrutiny of Payday Lending Transactions Involving Federally Regulated Banks
Other related information on this subject can be found in these places:
SEPARATE AND UNEQUAL- Predatory Lending in America ACORN Association of Community Organizations for Reform Now
Department of Housing and Urban Development (HUD) and the Department of Treasury US treasury
