Thursday, January 24, 2008

Predatory Lending 1/24/07

A commenter on my blog yesterday mentioned Senator Clinton's support to protect the poor who are taken advantage of by lenders who charge short term high interest rates and as much as $40 to cash a check. In the WSJ today, Ex-President Clinton and California Governor Arnold are promoting a plan (Beyond Payday Loans) to have banks within banks who would cooperate as financial institutions or by governmental legislation to prevent poor and usually uneducated people being further robbed by Pay Day Loan shark operations that proliferate wherever poor people live.

The article says that approximately 11% of all Californians do not have bank accounts, including 25% Latino and black residents. I know many of the Latinos are illegal but as long as they are here, we are obligated to treat them in a lawful manner.

I'm not sure that the proposed system would work because of their fear of being arrested or the fact that many, poorly educated, have bought into the "bleeding liberal" theory that no reputable financial institution can be trusted. Also, many people who need help will not accept help. That is why few homeless coalitions that attempt to serve the mentally stressed and depressed have a large measure of success; the poor often will not have one of the few things they can claim taken away from them; the freedom to make their own decisions; these bad decisions often leading up to fatal mistakes including slowly killing themselves and many times, others.

The Bill/Arnold dream claims it would put more than $8 billion for consumer spending, the amount millions of people with no bank accounts, now spend each year at check-cashing outlets, payday lenders and pawnshops.

The plan states that "it won't cost taxpayers a dime". I've heard that siren song before but I believe the people that don't use traditional banks should not be taken advantage of by opportunist money changers.

Think the plan out and try it in California, in Boston, Providence, Savannah, New York and Seattle, all who are spearheading their own efforts.

A better system has long been needed. I hope it works. Maybe someone will push the idea in Peoria. I would help.


Cheryl Shelabarger said...

Merle, Last year in addition to my full time job, I worked part-time doing taxes. The company I worked for offered the ability to receive one's tax return instantly, however there was a substantial charge involved. I tried my darndest to discourage people from utilizing this service. I showed them the percentage rates, and explained that they could get their return in 8 to 10 days at virtually no cost. Not a single person took my advice. They wanted their money, and they wanted it NOW. They would talk about wanting to buy a car or new furniture or a computer. When I would offer the fact that living without those items for 8 to 10 days more would not make a difference, they would become very upset with my advice.

These same individuals didn't want to hear about savings accounts or IRA's or anything else that might help them in the future. Oftentimes, these people would get back the entire amount deducted from their paychecks in federal taxes PLUS several thousands of dollars in additional monies from the EIC and a myriad of other tax credits. (AND if they received $5,000 or $6,000 last year, they fully EXPECTED to receive the same this year. Many became very angry if they received less even though they may have had a higher income this year)

It would appear that instant gratification has become the norm in today's world. I am the first person to say that there should be consequences for your actions, hence if a person insists on immediate gratification...there is, and should be a price to pay.

I will quote a very wise young woman (one of my daughter's observations after a trip abroad)
"The United States has the richest poor people in the world".

I couldn't agree more.

Merle Widmer said...


Thanks for your kind comments. I know, I was on a homeless committee for 5 years. We found out that if people don't really want to change their lives, litle success can be shown for all the billions of dollars and time invested.

Karrie e. alms said...

Merle: So true, like all change, including personal change, it is an inside job ---- YOUGOTTAWANNA!