Pinklining: Predatory lenders focus on minority women

Lorian Smith’s home in East Orange.

Women, especially in minority neighborhoods, have been disproportionately victimized by predatory lenders. High fees and onerous terms for what should be routine financial transactions have increased the debt of these women, according to a new report released by an alliance of community groups.

The report, “Pinklining: How Predatory Wall Street Products Loot Women’s Wealth, Opportunity, and Futures,” focuses on the experiences of hundreds of women in the Newark, Los Angeles and Minneapolis areas.

One of these women is Lorian Smith. “I played by all the rules,” she said. “I studied, I had a career, I bought a house, I raised a family.” Today, the East Orange retiree is struggling to prevent the foreclosure of her home while caring for a mentally disabled parent.

“What jumped out at me about this research is that African American women were 256% more likely than their white male counterparts to be offered subprime mortgages,” with high interest rates or difficult conditions, said Rep. Keith Ellison, whose district includes Minneapolis. “That and the fact that 10 years ago there were 2,000 payday lenders,” who usually offer short-term loans at high interest rates, “and today there are more than 20,000 “nationally, he said.

In addition to being more likely to be offered bad mortgage deals, women make up 60% of payday borrowers; and these borrowers, according to a California study, are concentrated in minority areas.

Women of all races make up nearly two-thirds of students at for-profit colleges, which are proportionately more expensive than many public institutions, according to the “pinklining” study, sponsored by New Jersey Communities United, the interfaith group Isaiah of the United States. Minnesota and the ACCE Institute (Alliance of Californians for Community Empowerment).

Suparna Bhaskaran, who wrote the study, borrowed the term “redlining,” the name banks give to the practice of making little or no loans in defined minority neighborhoods, which over the past century , was sometimes supported by public policy.

“It’s an inverted red line,” Bhaskaran said. “Loans are available, but on terms designed to create bad credit. Women try to improve their lives and the lives of their families, but instead they end up losing “wealth and assets.”

“I believe this research connects the dots in a unique and important way between the exploitation of certain financial practices and women and communities of color,” said Sister Simone Campbell, lawyer and director of Network, a Catholic organization of social services. (She is perhaps best known as the leader of the “Nuns on the Bus” social activism campaign.)

“The fabric of our society is torn apart by predatory financial practices,” which shift wealth from women and minorities to financial firms, Campbell said.

Some of the issues identified in the study are familiar to a wide range of borrowers, not just minority women. Student loan debt now exceeds auto loans, credit card debt and all types of other non-mortgage debt, according to the Federal Reserve Bank of New York.

For indebted households, the averages are $ 169,000 for mortgages, $ 48,000 for student loans, $ 27,000 for car loans and $ 16,000 for credit cards, according to the finance site. NerdWallet personal. The average household pays $ 6,658 in interest each year, or 9% of their income, according to the company.

Banks got most of their money from the interest they charged on loans; they then put it to work to grow the economy. But that has changed over the past few decades, as anyone with a bank account, investment account or credit card knows. Now, financial services companies derive their biggest profits from transaction fees.

The accusations fueled explosive growth in the financial sector, according to data from the US Department of Commerce. Finance now accounts for about 30 percent of all U.S. corporate profits, up from 9 percent in 1950, according to the department’s Bureau of Economic Analysis.

Minority women are particularly vulnerable to bad deals, as they often have fewer options, especially if they live in neighborhoods underserved by traditional lenders, according to Bhaskaran. Their access to credit is “unfairly influenced by the combination of postcode, neighborhood, race and gender.”

This adds to structural sexism and racism in hiring patterns, she said. For example, while overall women are paid about 79% of what white men earn, the figures are 63% for African American women and 54% for Latinos, according to a 2015 report by the American Association of University Women.

“Women often face occupational segregation, work that is undervalued and concentrated in certain sectors,” Bhaskaran said. “And a lot of the women we’ve spoken to do face a ‘second shift’, coming home to care for others.”

“Issues of race, gender and economics are very clearly central to the health and well-being of women and their families,” said Andrea Flynn of the Roosevelt Institute, a liberal think tank in New York. Current policy choices, including the regulation or non-regulation of loans, create a “wealth gap” that leaves “many women vulnerable and into a cycle of debt.”

Like many others, Smith’s troubles began with the bursting of the housing bubble in 2007 and the resulting Wall Street crash. She had spent decades working in a New York City hospital and had taken on a second job as a lab technician to supplement her income.

In 2002, she bought a house “in a great neighborhood,” with hardwood floors and a fireplace, “not a lot of land, but a nice house,” she says. But during the Great Recession, both of her jobs were cut. During this time, his mortgage was transferred between banks.

She turned to cash advances on her credit cards and a series of part-time jobs, and was eventually able to benefit from a pension and Social Security to control her finances, she said. . As with many other borrowers, confusion is Smith’s biggest problem. On the one hand, she is enrolled in a trial mortgage modification program. On the other hand, lawyers send her letters threatening her with foreclosure.

Smith says she has enough funds for her fixed rate loan, but her mortgage agent continues to change the monthly bill for it. The only explanation she could get for the evolution of bills is that it’s because of escrow, “which shouldn’t be a monthly thing,” she said.

At an event in Los Angeles highlighting the new study, organizers linked its publication to the current comment period for new regulations proposed by the Federal Office of Consumer Fraud Protection (CFPB). The regulations, which would reduce some of the worst loan abuses, are facing opposition from Republicans in Congress.

“The idea that people would have to go into debt to survive is a false choice,” said Doran Schrantz, executive director of Isaiah. “We need a wide range of measures, including lower housing costs.”

Paul Karr of New Jersey Communities United said his group supports strengthening CFPB regulations. But the experiences of Smith and others interviewed during the study show that solutions require a holistic approach, he said.

“We are very happy to have this data from across the country, which confirms what we have learned anecdotally from women here in New Jersey, that they often face discrimination and mistreatment in transactions. daily financials, ”he said.

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