Poor communities lose billions to predatory lenders
New report chronicles the disparities that continue to plague the banking industry.
by Freddie Allen NNPA News Service | 1/27/2015, 11:50 a.m.
WASHINGTON – Predatory lenders continue to target poor, African American and Latino communities, siphoning off $103 billion in fees and interests every year, and the rest of us are paying for it, according to a recent report by United for a Fair Economy.
“This is more money lost in poor communities than the United States spends on domestic food aid annually,” the report said. “We as a society end up subsidizing that lost income (an average of $3,029 per affected household) through a social safety net that is already underfunded and overcapacity.”
In “State of the Dream 2015: Underbanked and Overcharged,” United for a Fair Economy (UFE), an independent research group that advocates for economic equality across race, gender and class lines, chronicled the disparities that continue to plague the banking industry.
Mike Leyba, the communications director at UFE and co-author of the report said that systemic economic exclusion, largely based on race, has existed for hundreds of years in the United States.
The free labor of kidnapped and enslaved Africans enabled white male land owners and the financial institutions that supported them to accumulate massive amounts of wealth over hundreds of years.
Following the Civil War, Jim Crow laws and “The Black Codes,” continued to deprive freed African slaves of economic opportunities for decades.
After World War II, the GI Bill provided white male veterans a pathway to college, professional careers and a boost into the middle class, a bridge that was closed to African-American veterans who also fought and spilled blood overseas. Later, the Federal Housing Administration blocked African-American families from moving into suburban neighborhoods, built with and partially funded by government subsidies.
“More than a quarter of all white families shifted from renting to owning in the twenty years following WWII,” stated the report. “Despite laws to the contrary, black people were excluded from buying homes in white neighborhoods and were forced instead to live in urban ghettos.”
According to the UFE report, less than 1 percent of all mortgages from 1930 to 1960 were issued to African-American people.
By 2013, the median wealth held by white families ($141,900), dwarfed the median wealth ($11,000) of African-American families.
“As an estimated 80 percent of assets come from transfers from prior generations, the history of the financial situations of prior generations is a primary cause of the racial wealth gap,” stated the report.
Leyba said that economic exclusion, largely based on race still exists, but it’s much harder to pinpoint.
“It may not be legalized or sanctioned by the federal government,” said Leyba. “But it still exists.”
Economic exclusion continues to plague the banking sector, leaving 93 million Americans “unbanked” or “underbanked.”
“The unbanked are people that do not have any type of consumer checking account, and are outside the entire banking system,” the report explained. “The underbanked are people that have a checking account, but also rely on Alternate Financial Service Providers.”
According to the report more than 20 percent (20.5 percent) of African-American households were unbanked in 2013, compared to 3.6 percent of white households.