H O N O R I N G D R . M A RT I N L U T H E R K I N G , J R .
Predatory Lending Practices Continue to Weaken Blacks and Hispanics
By Charlene Crowell
NNPA Columnist
I
n the first report of its kind, the Center for Responsible
Lending has examined consumer lending markets
across-the-board and found that despite recent regulato-
ry 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 paints a picture of working families struggling
to manage debt while coping with stagnant incomes and a
substantial decrease in wealth. In fact, the housing crisis has
produced the largest documented 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 foreclosure 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 significant evidence that
African-American and Latino borrowers and their neigh-
borhoods were disproportionately targeted by subprime
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 neigh-
borhoods were more likely to receive higher-cost loans with
risky features such as prepayment penalties.”
CRL’s student loan findings echoed these same lending
ills.
“Low-income students and students of color are even
‘In 2008, 16 percent of African-
American graduating 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’
more likely to need to rely on student loans and to become
saddled with large amounts of debt upon graduation,” the
report stated. “In 2008, 16 percent of African-American
graduating 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 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 high-
er monthly payments on private student 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
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 Protection
Bureau together provide a broad database for findings.
Despite remaining lending challenges, the report shows
that consumers are better off today because of stronger pro-
tections 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 pre-
dictions, 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 themselves as short-term solutions.
The third and final release in the series will examine abu-
sive practices in debt collection and servicing, and conclude
with a chapter documenting how lending abuses often tar-
get the same households and have a cumulative—and par-
ticularly disastrous—impact on low-income households
and communities of color.
Former Federal Deposit Insurance 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.”
Sign The Skanner News
petition to President Obama,
“A Marshall Plan for Black
America,” at the
“We the People…” website:
https://petitions.whitehouse.gov
The Portland and Seattle Skanner Martin Luther King Special Edition January 16, 2013 Page 13