Opinion
Predatory Lending Hurts Blacks, Hispanics
“Challenging People to Shape
a Better Future Now”
B ERNIE F OSTER
Founder/Publisher
B OBBIE D ORE F OSTER
Executive Editor
T ED B ANKS
Advertising Manager
J ERRY F OSTER
Account Executive
L ISA L OVING
News Editor
H ELEN S ILVIS
Multimedia Editor
B RUCE P OINSETTE
Reporter
D AVID K IDD
Graphic Designer
M ONICA J. F OSTER
Seattle Office Coordinator
J ULIE K EEFE
S USAN F RIED
Photographers
The Skanner Newspaper, established
in October 1975, is a weekly publica-
tion, published each Wednesday by
I
n the first report of its kind, the
Center for Responsible Lend-
ing has examined consumer
lending markets across-the-board
and found that despite recent regu-
latory reforms – predatory lending
continues to undermine American
households trying to rebuild their
finances after the recession.
The State of Lending in America
and its Impact on U.S. Households
(State
of
Lending,
http://rspnsb.li/stateoflending)
paints a picture of working fami-
lies struggling to manage debt
while coping with stagnant
incomes and a substantial decrease
in wealth. In fact, the housing cri-
sis has produced the largest docu-
mented wealth gap ever between
White households and families of
color.
From 2000-2010, African-
American family wealth dropped
53 percent, and Hispanic families
lost 66 percent. By comparison,
average White household wealth
dropped only 16 percent. The fore-
closure crisis and resulting eco-
nomic downturn have turned back
the clock on previous wealth
gains, especially in communities
of color.
The report states, “There is sig-
nificant evidence that African-
American and Latino borrowers
and their neighborhoods were dis-
proportionately targeted by sub-
prime lenders. Borrowers of color
were about 30 percent more likely
to receive higher-rate subprime
loans than similarly situated white
borrowers. Borrowers in non-
white neighborhoods were more
R ESPONSIBLE
L ENDING
Charlene
Crowell
likely to receive higher-cost loans
with risky features such as prepay-
ment penalties.”
CRL’s student loan findings
echoed these same lending ills.
“Low-income students and stu-
in family wealth;
Auto loan interest-rate markups
cost consumers nearly $26 billion
each year; and
Borrowers in lower credit tiers
pay up to 68 percent higher
monthly payments on private stu-
dent loans than on safer federal
loans.
The State of Lending is the first
of a three-phased and in-depth
view of U.S. households’ income,
spending, debt, and wealth. It also
outlines predatory practices in
mortgage lending, credit cards,
student loans, and auto loans that
In fact, the housing crisis has
produced the largest documented
wealth gap ever between White
households and families of color.
dents of color are even more like-
ly to need to rely on student loans
and to become saddled with large
amounts of debt upon graduation,”
the report stated. “In 2008, 16 per-
cent of African-American graduat-
ing seniors owed $40,000 or more
in student loans, compared with 10
percent of whites, eight percent of
Hispanics and five percent of
Asian-Americans.”
Additional findings showed that:
“Spillover” costs of foreclosures
have wiped out nearly $2 trillion
undercut the benefits of these
products. Incorporating major
CRL findings in recent years with
pertinent research from sources
such as the Federal Reserve
Board, the Pew Research Center
and the Consumer Financial Pro-
tection Bureau together provide a
broad database for findings.
Despite remaining lending chal-
lenges, the report shows that con-
sumers are better off today
because of stronger protections on
mortgages and credit cards. The
Dodd-Frank Wall Street Reform
and Consumer Protection Act,
which incorporated a number of
previous state initiatives to curb
abusive mortgage practices, has
ended many of the worst practices
of the subprime era. And, contrary
to industry predictions, the cost of
borrowing on credit cards has not
increased since the CARD Act
passed; transparency has greatly
increased and the use of hidden
fees has gone down.
The next two State of Lending
reports will be released in early
2013. The next release will cover
payday loans and other financial
products that trap people in long-
term debt while portraying them-
selves as short-term solutions.
The third and final release in the
series will examine abusive prac-
tices in debt collection and servic-
ing, and conclude with a chapter
documenting how lending abuses
often target the same households
and have a cumulative—and par-
ticularly disastrous—impact on
low-income households and com-
munities of color.
Former Federal Deposit Insur-
ance Corporation Chair Sheila
Bair authored State of Lending’s
foreword, noting that predatory
lending harms the entire U.S.
economy. She warns, “If abusive
lending practices are not reformed,
we again will all pay dearly.”
Charlene Crowell is a communi-
cations manager with the Center
for Responsible Lending. She can
be reached at: Charlene.crow-
ell@responsiblelending.org.
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Fax: (503) 285-2900
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National Newspaper Pub lishers Associ-
ation and West Coast Black Pub lishers
Association.
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Page 4 The Portland Skanner
World’s Biggest Metro-Areas Key to Growth
L
ooking back, 2012 was a
slow year for both devel-
oped and developing coun-
tries as major unresolved issues
from 2011 carried over into this
year. The European Union contin-
ued to battle fiscal and debt prob-
lems, while the U.S. recovery
struggled to gain a foothold. Low
growth and uncertainty in devel-
oped economies affected both
large and small emerging
economies, exposing domestic
weaknesses in those markets. No
major national economy is power-
ing a needed global recovery.
Beyond regional and national
divides, however, examining
growth patterns in metropolitan
areas provides clues to the sources
of growth and potential recovery.
For example, the 300 largest metro
economies worldwide accounted
for nearly one-half of the global
economy, delivering more than
half of the global economic
growth between 2011 and 2012.
And this despite containing only
19 percent of the world popula-
tion.
The 2012 Global MetroMonitor,
a Brookings study of economic
growth in the world’s 300 largest
metropolitan economies, reveals
that three-quarters of the fastest-
growing metro areas in 2012 were
in developing Asia, Latin Ameri-
ca, and the Middle East and
Africa. While most of these metro
areas are in developing countries,
some metro areas in high-income
countries were part of the fastest-
growing metro economies last
year (Macau, San Juan, and
December 19, 2012
G UEST C OLUMNIST
Emilia Istrate
Riyadh).
Western European metro areas,
in contrast, had a bad year overall
in 2012, with three-quarters of the
lowest-performing
metro
economies hailing from the
region. Athens was the bottom
performer for a third year in a row,
reflecting the ongoing crisis in
Greece.
men, Hamburg, Hannover, Nürn-
berg- Fürth), joined by others in
Scandinavia (Stockholm, Helsin-
ki), Austria (Linz), Belgium- Ger-
many (Aachen-Liege), and France
(Paris).
The North American outper-
formers were few and far in
between, including one Canadian
metro area (Edmonton), two in the
Northeastern
United
States
(Boston and Worcester), Detroit,
and three in the Western United
States (Salt Lake City, San Jose,
and Seattle).
Across the globe, 56 metro areas
Across the globe, 56 metro areas did
better than their countries on both
indicators used in our study while
experiencing growth in 2012.
However, this was not only a
story about Southern Europe.
Metro areas in other parts of the
region (Brussels, Leeds-Bradford,
Lille, and Rotterdam-Amsterdam)
registered declines or almost zero
growth in employment and/or
GDP per capita in 2012.
Yet there are glimmers of hope
across the Atlantic. Despite the
ongoing problems on the conti-
nent, nine Western European
metro areas grew faster than their
countries on both indicators, two
more than in North America. Four
were German metro areas (Bre-
did better than their countries on
both indicators used in our study
while experiencing growth in
2012. Even more important, these
metro “pockets of growth” were
spread around the world, from
twelve in developing Asia-Pacific
(such as Mumbai, Kolkata, Jakar-
ta, and Kuala Lumpur) to five in
Eastern Europe and Central Asia
(Ankara, Bucharest, Istanbul,
Izmir, and Warsaw).
Other optimistic signs come
from the metropolitan economies
that recovered to pre-recession
levels or defied the slowdown
trend with accelerating growth in
2012. Three U.S. metro areas
(Dallas, Knoxville, and Pitts-
burgh) managed to recover in
2012. In contrast, most metro
areas in the developing Asia-
Pacific and Latin America regions
suffered no recession in the last
five years or have fully recovered
to pre-recession levels. Overall,
2012 was better than last year for
American metro areas, with some
turning the corner into positive ter-
ritory.
These metropolitan growth pat-
terns are the result of a combina-
tion of national and local factors.
In the short run, less wealthy
metro areas are typically growing
faster than their richer counter-
parts. Over the long run, country
growth matters most to metro-
level growth. But metro-specific
factors such as industry specializa-
tion and educational attainment
shape the growth potential of
metro areas as well.
As the U.S. economy is powered
by metropolitan areas, so too is the
global economy. This new eco-
nomic reality often goes unrecog-
nized, with economic discussions
focusing on national and regional
dimensions. Better understanding
this reality would help national
governments create the conditions
needed to empower metro areas to
secure future growth.
Emilia Istrate is an associate fel-
low at the Brookings Institution
Metropolitan Policy Program, and
the recent lead author of Global
MetroMonitor 2012. The views
expressed are the author’s own.