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Folks, what has happened to our society that we allow the strongest to prey on the most vulnerable? And, not only do we allow this and pass laws to make it legal, but then we blame the most vulnerable for being vulnerable.
I’m talking about predatory lending. This is lending that targets that part of our society that has trouble getting from paycheck to paycheck, and has no family support when an emergency expense arises.
I have seen it written that average citizens do not understand the difference between prime market and the sub-prime market. They do not understand yield spread premiums, or the difference between a 30-year fixed mortgage and an adjustable rate mortgage.
I am willing to bet a milkshake that very few citizens reading this column know all of that. And why should we?
When I teach this stuff I put it in what I call “street talk,” so my students are able to understand. When I do business with my local banker, he does the same. He puts loan language in terms that his customers understand.
The same is true of my local Realtor and local appliance store. When we do business locally, we trust each other. We treat each other with respect and honesty. Locally, we know each other. We go to church together, we grew up together, and we live next door to each other. We work on community projects together.
So, what does our government do? Well, instead of making it illegal to prey on our fellow citizens, they recommend that all of these problems could be fixed with some consumer education and personal responsibility. I believe in personal responsibility; but do I have to be an expert on every subject?
This new bill, Senate Bill 185, also “provides for consumers credit education in our public schools.” Our public schools used to teach this, and some still do, but this was before the state started directing all of our time to testing and the preparation for testing.
Folks, there is no amount of education that will protect us from greed. No amount of education will help us understand all the double talk that is written into our laws and also written into the pages and pages of “legalese” into loan contracts.
When I hear a person say that we citizens should take personal responsibility to defend ourselves against dishonest, greedy, and multinational corporations, it just tells me that they are trying to convince themselves that this is the solution so they can ease their own conscience. This way they don’t have to feel guilty, as their friends fleece the lamb.
Recently, our government has passed several laws that benefit corporations and put the average citizen at a disadvantage.
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No. 1 is the new prescription drug law. You have to look far and wide to find someone who has been helped…besides the drug firms, that is.
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No. 2 was the bankruptcy law that made it easier for corporations to declare bankruptcy and more difficult, actually almost impossible, for the individual with the net result being the citizen is trapped, for life, and can never recover from a financial disaster.
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No. 3 was frivolous lawsuits. First, before the new law, major corporations filed most frivolous lawsuits, about eighty percent, and second the new law only made it more difficult for citizens to seek relief. It did not change anything for the big companies.
Once in a while we get a law that doesn’t help or hurt anyone. It is just passed for “window dressing.” The latest in this category was Ohio raising its minimum wage to the federal minimum wage. Whenever a state government has a law different than the federal government, on a subject that affects interstate commerce, the most severe law takes precedent. The federal law is $5.15 per hour. So, we were already at $5.15 per hour before we raised our minimum wage to $5.15 per hour.
Back to predatory lending. When I go to my doctor, I do not have to know all about the medical field or when I go to my lawyer, I am not required to be an expert in law. I am not required to know all about plumbing when I call my plumber. So, why am I supposed to know all about lending when I go to a lender?
For example, most people find out the hard way that many of their interest rates, on different loans and credit cards, are raised when they are late on just one payment. Even though the increase in their rates has nothing to do with the bill that the person may have been accidentally late in paying.
More and more people are dropping into the paycheck-to-paycheck lifestyle. You may blame it on anything that you want, undocumented workers, working for low wages, world corporations, the death of unions, loss of good jobs to China and India, robots, the squeeze on farmers, anything that you want, but the fact is that the number of people living below, equal to or just above the poverty level is growing rapidly.
This means that they have just enough money to meet their subsistence expenses, rent, food, and energy. If their car breaks down, it must be fixed or they lose their jobs. These families have no extra cash or no family support, and this is where predatory lending steps in. Some lenders will charge interest rates over 100 percent on an annual basis. Not the 5, 6, or 7 percent that you can get at your bank or even the 15 or 20 percent on credit cards.
So, the most vulnerable among us, the ones who need help, have no representation. And most importantly, we need to turn the downward family income trend around before we all fall below the poverty line.
Bill Horne
Bill Horne is a professor of economics at Southern State Community College and a columnist for The Times-Gazette . |
