Predatory lending is relatively a new item on our ever growing list of reasons not to trust “whitey” for anything. This issue largely grew with the increasing presence of payday loan shops in mostly low to middle income area with a high Black/Hispanic population.
At first glance, one can easily be moved to anger to hear of stories of a young father trying to support his family, or an elderly person needing money for daily living expenses having half (if not all) of their assets repro’d simply because they were not able to make payment on their loan. But to understand this problem, one has to see this problem from both sides.
Not too long ago, both my wife and I had to use the services of payday loan businesses (a couple of them) to make ends meet. As expected, all of the payday loan stores were located in what would be considered the ‘hood in many places. We walked in and spoke to the person at the counter. This person walked us through the whole process and told us when payment was due. From time to time during the conversation, we politely stopped the individual and asked them to re-explain points that we felt were not covered verbally on the full contract that was in front of us. Although we hated the fact that we were to pay some ridiculously high interest rate (somewhere like 350-400%–I’m not making this up), we knew what we had to do in order to make ends meet. We also understood that if we did not make payment all together, the collectors would come after us with a vengeance. I completely understand how someone can feel “tricked” if these terms catches someone by surprise. But “legal” payday loans businesses are required by law to have all the stipulations in writing and given to the customer. If the payday loan representative is talking too fast, tell them to slow their behind down—after all, it is your behind on the line.
In order to understand this issue, look at it from the prospective of the payday loan business.
The business itself is based on loaning out money to people who for WHATEVER reason did not have the means to get it any other way. Wouldn’t YOU want some assurances that you would get that money back? THAT IS THE RISK YOU TAKE. Another point that is also lost in this debate is the huge cost to the lender to order a repossession of asset. Banks are not in the business of warehousing TVs, furniture, cars, etc. They are strictly in the liquid asset business–that’s it.
For the lending institutions out there who do not provide these stipulations in print or communicate these terms to customers, they are clearly violating the law and should be punished.
But for most of these predatory loan cases, don’t be surprised to find out that not taking the time to read or ask questions was the main culprit.
Borrowing money is always a huge risk because you are basically telling institutions that you promise to pay them back. Because most of us do not have the ability to foretell the future, this can be a big risk especially for those who live paycheck to paycheck. If you are one of those people, DON’T TAKE THE RISK if there is any question in your mind weather or not you will be able to pay off the loan on time. For lending contracts that written in a way that is too complex for the average person to understand, take the contract to someone you know who does understand and can explain the terms to you. Cases like this are fertile ground for contract misrepresentation. In the meantime, don’t sign anything!
Politicians like Donna Brazile are trying to frame this issue as if “The System” is backing po’ folks into a corner in which payday loan businesses are the only way out. And based on her argument, because po’ folks lack the common sense to read and ask questions, this issue automatically because the fault of lending institutions.
In the very near future when the real estate market begins to cool down and interest rates begin to go up, it is being predicted by professionals in the industry that we will begin to see a rise of foreclosures due to the huge amount of people who have bought into the interest-only type loan programs with income that does not correspond with an interest rate that will inevitably rise. I assure you that many folks who have participated in the programs have not allowed that fact to sink in. I know that the commercials sound as slick as the loan officers themselves, but are we to blame banks for this predicted trend or consumers who are too eager to get the biggest house without counting the cost?
In the end, lending institutions are just like any other business–they wan to make money. With that being said, I refuse to believe that my people, Black people are too scared and easily intimidated to read, ask questions, or even better, turn down the whole deal all together if they feel they are not getting the whole picture. Many of our forefathers possessed this common sense, why not us?
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