Predatory Lending: Robin Hood in Reverse

The story of Robin Hood – of the noble bandit stealing from the rich in order to give to the poor – is a popular cultural motif. It’s a shame that that’s just not true, that the real scenario is the rich stealing from the poor in order to give to themselves. Predatory lending has become one of the more common ways that this is now happening. Unfortunately, these practices are not even thought of as stealing. Actually, they are perfectly legal.

So-called “payday” services, including check-cashing and short-term loans, are the most scurrilous of these business activities. When I typed “payday services” into the Google search engine, I found one directory that included 66 separate providers, and that was only on the first page of results!

In Columbus, Ohio, a local community advocacy group has been calling for legal limits on these services. BREAD (Building Responsibility, Equality and Dignity) is demanding that the Ohio legislature limit the interest rates that can be charged. In a story written by Sherri Williams for the Columbus Dispatch (May 8, 2007), an example was given of a woman who borrowed $500 and ended up paying back $3,000. Loan sharks might actually provide better interest rates than that! Obviously, these are lucrative businesses, since the number of shops in Ohio grew from 107 to 1,562 in the ten years between 1996 and 2006. Of course, when interest rates can be as high as 390% a year, who should be surprised?

Targeting the Elderly

The elderly are increasingly the victims of various kinds of scams.  Older people – especially those who are poor – are seen as easy targets.  Telemarketing schemes often focus on the old through lists of names compiled by organizations such as InfoUSA, according to Charles Duhigg of the New York Times in an article headlined "Banks aid thieves in bilking elderly, feds say" (Columbus Dispatch, Sunday, May 20, 2007).

This "bilking" can occur in many ways.  It is most blatant in the case of individuals who find their bank accounts have been emptied out.  Even legitimate companies help.  According to Duhigg, "And major banks have made it possible for criminals to dip into victims' accounts without their authorization, according to court records."  But the elderly are taken advantage of in other ways as well.

Being Poor in America

Recently, I was asked to join Credit Slips as a guest blogger.  I am a social scientist, and my work has focused for many years on the broad issues of poverty and inequality.  Everyone in our society is affected by credit in many ways.  The poor are especially affected because of the kinds of credit to which they have access - especially predatory lenders who prey on the disadvantaged.  I include so-called "payday" services among these predatory lenders. I'd like to begin by taking a look at the nature of poverty and inequality in the United States.  Since the beginning of the Reagan era, far too many people in this society - especially politicians and media figures - have become very hard-hearted and mean-spirited, working long and hard to demonize the poor.  What is popularly known as "welfare reform" - the Personal Responsibility and Work Opportunity Reconciliation  Act (PRWORA) of 1996 was the final outcome of these efforts.  This law changed public assistance from an entitlement to a privilege and has put many of the most disadvantaged individuals and families in our society in dire circumstances.  My colleague Elizabeth A. Segal and I recently edited a book titled The Promise of Welfare Reform:  Political Rhetoric and the Reality of Poverty in the Twenty-First Century (Haworth, 2006) that documents just how draconian welfare reform has been and how ruthless it has been on those at the bottom of our society. But there is a bigger problem:  during the past quarter century poverty and public assistance have come to be seen as one and the same.  The reality is different.  The poor in our society have never received much help from the government, whether at the federal, state, or local level.  But that doesn't seem to matter.  It has been easy for politicians to use the poor as a whipping post and to blame them for their own problems.  And much of the public has bought into that viewpoint, perhaps as a way of separating themselves from the poor – from being seen as even having the possibility of being among the poor.