Loans Drive Poor People Poorer

Precinct Reporter by: Diane Anderson Nobody pays more for money than the poor. Ever since the economy tanked, banks that had started to reach low income communities with financial products have long since bailed, opening the door for tens of thousands of quick cash places to cut huge profits on the backs of the low income communities. Payday loan customers typically pay over 300% in interest on fast turnaround loans.  At last count, a recently released 2011 federal government study shows that 17 million Americans have no bank account, and 51 million are under-banked. The study shows that 29% of Americans did not have any savings accounts. Of all groups, African Americans make up the most unbanked or under-banked. Of the under-banked, Blacks made up 33.9% of households, compared to 28.6% of Latinos, and 28.8% of foreign born non-citizens.  Marlene Merrill, spokesperson for the Community Action Partnership of San Bernardino County, said that their organization frequently provides free workshops and financial literacy resources to help avoid costly scams. Usually, she networks with other local agencies, attending events and handing out information, but often the most disenfranchised community is hard to reach in a timely way. When the word gets out, the extreme local need is obvious. “We went over to a city Family Resource Fair a couple of months ago. I was stunned at how many people came. Some of the resource fairs at schools, they’re coming in droves,” she said.  This month, Merrill Lynch is putting on CAP workshops around credit. The Inland Empire Women’s Business Center is also holding workshops at their office on housing discrimination and predatory lending. Of all their programs, probably the best loved, but least known, is the CAP Individual Development Accounts program. The organization is trying to increase funding to bring on more people by year’s end. That program gives away $4,000 to qualifying low income participants to buy a house, continue their education or start a small business. CAP is also putting up flyers in theaters, at malls, and in the libraries to get the word out about free financial resources. “They’re there in the libraries using the computers. Interesting, when they’re in the libraries, they’re on Facebook, so we’ve really ramped up our social media,” she said. Sasha Werblin, Economic Equity Director at the Greenlining Institute, said fair financial products are a big policy concern that impacts over 34 million people, mostly low income people of color, who rely on check cashing or other alternative financial products.  Last week, the organization commended recent moves by Union Bank to help low- and moderate-income customers with low cost banking choices, and an “Access Account,” low cost checking and no minimum balance basic banking services. The new account with ATM access, direct deposit, and no overdraft fees is a step in the right direction that will hopefully spawn more banks that provide responsible financial products, she said. “I think folks in the advocacy world fighting for economic equity can celebrate this and what it stands for,” she said. “We all worked hard to ensure that CFPB [Consumer Financial Protection Bureau] is a safe place and will continue to grow and sustain itself.” CFPB is a watchdog agency that has been meeting with several industries and advocacy groups, such as Greenlining. For years, Greenlining has tugged at the ears of big bankers about the importance of extending socially responsible services to the working poor and low income families. The organization sees some recent products as a start to help the low income community; many dive into deeper poverty because of extreme fees from check cashing stores.  A recent Pew Center study, “Who Borrows, Where They Borrow, and Why,” shows that on average, a borrower takes out eight loans of $375 each year and spends $520 on interest. About 69% are using their loans to cover basic expenses, such as rent, mortgage, food or utilities, and the usage was 105 percent higher for African Americans than other races. The report showed that 12 million Americans used payday advances in 2010, the most recent data available, with borrowers spending about $7.4 billion each year at 20,000 quick cash storefronts. Since its inception, Greenlining has supported CFPB and several of its policy regulations that are addressing problems that communities of color and low income consumers are facing.   Another strong regulation move this year was Section 342 of the Dodd-Frank Act (DFA), and the creation of the Office of Women and Minority inclusion for all government agencies that oversee workforce development and supplier diversity. She said that Section 342 has given Greenlining and other advocates leverage and conversations with industry, and expand diversity concerns with regulators. “There is a huge barrier with improvements with supplier diversity, and lack of transparency in how they’re collecting reporting and spearheading these programs,” she said, adding that Greenlining is working with the new OWMI to make sure government agencies are hiring staff from the Equal Employment Opportunity department.  There is also a renewed push toward streamlining the process and better reporting. Barriers to communities of color in real estate is another recent concern for Greenlining, including “collusion,” meaning that some realtors are not getting proper access to property listings. They seem to be going out to friends, and/or offline conversations that alert clients to get ready for upcoming properties. It’s a lockout. She said that there is a need to engage ethnic realtors that have been redlined from the Real Estate Owned acquisition and disposition business, and bring them back into the fold. “Yes, we have heard that,” she said. “They are kind of those side deals that negatively affect other players who want to be part of that space.” Call Community Action Partnership Workshops at www.facebook.com/CAPSBC. The post Loans Drive Poor People Poorer appeared first on The Greenlining Institute.