Payday lending often hurts people of color
Lewis DiuguidA petition drive in Missouri offers people the best hope to stop payday loan joints from stripping the wealth from urban cores.
Advocates want to cap at 36 percent the annual interest rate charged instead of the current 400 percent and more.
It’s an important Black History Month issue because African Americans and Latinos are disproportionately hurt by the payday loan industry particularly in Missouri, according to a 2011 study, “Credit Segregation: Concentrations of Predatory Lenders in Communities of Color.”
The National People’s Action report focuses on Kansas City, Kansas City, Kan., Chicago, St. Louis, Detroit and Peoria, Ill. It found that in the depth of the financial crisis in 2009, many homeowners in mostly white neighborhoods were able to get real estate-secured bank credit. Communities of color have suffered the most financial damage during the fallout from the mortgage crisis, experiencing the biggest drops in access to mainstream credit. Payday loan places aided in draining wealth from black and Hispanic communities.
“The wealth-stripping payday lending industry operates in the highest concentrations among communities of color — a discouraging sign for future prospects of wealth creation for the working poor and fixed-income residents among these communities,” the report said. Almost no predominantly African-American or Latino neighborhood has stable levels of prime credit for homeowners, yet most have an abundance of payday lenders.
So even though mortgage rates have stayed incredibly low to try to spur lending and pull the U.S. economy out of a long slump, homeowners and others in America’s poorest areas are locked out of inexpensive credit and channeled toward “advance paycheck income at triple-digit interest rates.” It is economic discrimination fueled by racism. It is a 21st century form of slavery in which the privileged benefit at the expense of people of color.
The report said African American homeowners saw an 86 percent decrease in overall home refinance loans; Latino homeowners had a 76 percent drop between 2006 and 2009 compared with whites, who enjoyed an 8 percent increase in overall refinance loans. “The country’s megabanks, Bank of America, Wells Fargo, Citibank and JPMorgan Chase contributed significantly to the trend of declining mainstream credit issued to black and Latino homeowners during the crisis.”
Bank of America in December agreed to pay $335 million to resolve allegations that its Countrywide unit practiced widespread discrimination against qualified African American and Latino home loan borrowers. Because black and Hispanic homeowners have been disproportionately hurt by the foreclosure crisis, the recently announced $25 billion deal to help foreclosed and struggling homeowners should focus more on helping minorities.
“Compared to 2006 levels, the major four banks issued 38 percent more prime-rate refinance loans to white homeowners while they extended 63 percent fewer prime-rate refinance mortgages to African American homeowners and 59 percent fewer to Latino homeowners,” the report noted.
“In predominantly white areas, refinance loan volume in 2009 was up 12 percent of total homeowners while in areas with highest concentration of black and Latinos, only an estimated 1.6 percent of the area’s homeowners received a refinance loan.” Mostly white communities received refinancing at 6.5 times the rate as homeowners did in communities of color.
Yet black and Latino neighborhoods had the highest concentration of payday lenders. They had on average two within one mile, six within two miles and 12 within three miles compared with white areas, which had two within two miles and about four in three miles. What’s worse, the report points out, is the country’s major banks — Bank of America, Wells Fargo and US Bank — “fund approximately 38 percent of the payday lending operations in the Midwest study area.”
They discriminate against people of color by not providing low-interest loans but then shake down the communities by offering payday loans, and it’s all legal. It affects urban areas’ financial health, increasing foreclosure rates and decreasing wealth for such things as home improvements or sending kids to college.
National standards are needed to end predatory lending. But until then, Missourians behind the petition drive are on the right track to level the financial playing field for all borrowers.
To reach Lewis W. Diuguid call 816-234-4723 or send email to Ldiuguid@kcstar.com.
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Steven Fetter
66223
2 months, 3 weeks agoIf the terms of a proposed loan are unfair to either party, walk away from the deal. I think most people are smart enough to figure that out. As for the rest, you can’t legislate against stupidity.
George Hunsucker
Northland
2 months, 3 weeks agoStupidity cannot be the cause in lewis’ world Steven. It is and always will be racism.
I wonder why if this is such a good business, why isn’t black America swooping into the ghetto, undercutting the terribly high rates and still making a profit????? And, of course, helping their race. With all these highly paid athletes and entertainers, why aren’t they helping their race???
Kay Fox
Kansas City
2 months, 3 weeks agoAllow the sharks to charge 2% over the Fed. Res. per year, with no penalties for early retirement of the debt.
Lewis, wouldn’t that solve the problem then it wouldn’t matter what a person’s IQ is, true?
You have friends in high places…well?
George Hunsucker
Northland
2 months, 3 weeks agoI don’t know if a 2% spread covers Luigi’s salary Kay :)