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 When
NAACP chairman Julian
Bond denounced “payday lending,” most delegates to the civil
rights group’s national convention in Miami, this summer, assumed
they knew who he was talking about. “We despise this predatory
practice that targets the poor, especially blacks. Charging
annual interest rates of 390%, these companies prey on the weak,
trapping them in unending cycles of debt.”
The
scavengers of finance have always gravitated to the ghetto to
gouge outrageous profits from the poor. Now, however, the bottom
feeders have been joined by the brand names of lending, super-predators
who lock on to the  equity
of previously credit-worthy customers and systematically destroy
it. These are not fly-by-night operators, but the pillars of
American finance, among them giant Citigroup and venerable Wells
Fargo, the 1880s transcontinental stagecoach line that has merged
and morphed into the nation’s largest home lender and 5th biggest
bank.
“Wells
[Fargo] can expect no peace until our members are satisfied
that they are ending abusive lending practices and taking steps
to repair the damage already done," declared Maude Hurd,
President of 150,000-family member ACORN,
the Association of Community Organizations
for Reform Now. ACORN played a key role in forcing a $484 million
settlement to consumers by Household International, owner of
Household Finance and Beneficial Finance – the largest
direct consumer restitution in history.
Purging
the “A” list
Companies like Household International have long
worked the low-end market, providing “subprime” loans at high
interest rates to customers who might not otherwise qualify.
More recently, national banks such as Wells Fargo muscled their
way into the subprime market, establishing “financial service”
 subsidiaries
to tap borrowers excluded from the “A” credit list – including
customers wrongfully categorized as bad risks and, thus, delivered
to the tender mercies of Wells Fargo Financial and Wells Fargo
Funding. There, folks with relatively good payment prospects
could begin their Wells Fargo adventure modestly, with just
a credit card loan, and end it homeless and car-less. ACORN
charges that Wells’ predatory practices include:
“…charging
interest rates much higher than warranted by borrowers' credit;
imposing excessive fees, which inflate the amount of home loans;
securing loans with both a house and a car, which increases
the loan size and the vulnerability of borrowers; utilizing
extended and high prepayment penalties, which trap borrowers
in high-cost loans; and refinancing borrowers into loans that
leave them with more debt staked against their homes, higher
payments and higher rates.”
As
if there were not enough truly poor people to exploit, banks
steer customers who should qualify for loans at 6 or 7 percent
rates to their subprime subsidiaries, where the menu starts
at 10 or 12 percent and gets more expensive as the extras are
piled on the plate. At a Wells Fargo office, loans may exceed
the value of the customer’s total equity. “Borrowers who are
loaned more than 100% of the value of their home are effectively
trapped in that loan or package of loans, no matter how detrimental
the terms,” said ACORN President Hurd.
Subprime
lending is the growth sector of U.S. finance capital – simply
because that’s where the super-profits are. The blue chip gangs
of Wall Street engage in wholesale entrapment to both increase
the number of people that can be charged the highest rates and
prevent them from escaping back to prime territory. With 4.3
million customers at 1,600 branches, the ever-acquisitive Citigroup’s
subprime outfit, CitiFinancial is “a model for America’s financial
apartheid: a company that’s slow to offer affordable credit
to low and moderate income communities, then profits by pushing
a costly alternative,” writes Michael Hudson in the Summer
Issue of Southern Exposure magazine.
“A
national study by the Community Reinvestment Association of
North Carolina (CRA-NC)
concluded that large numbers of ‘A-credit’ customers are being
charged higher rates only because they had the misfortune of
walking into one of Citi’s subprime mortgage units rather than
one of its prime-rate lenders.
“The
study estimated this group includes 90,000 predominantly African-American
customers who took out first mortgages in 2000 from Citi’s
panoply of subprime lenders. According to CRA-NC’s calculations,
these borrowers paid an average of $327 a month more in interest
than their prime-rate counterparts, or an average of $110,000
per borrower by the time the loans are paid off. Over the
lifetime of their loans, these borrowers excessive payments
could total as much as $5.7 billion.”
Hudson’s
article is titled, “Banking on Misery.” Although the sophistication
and national reach of huge corporations such as Citigroup and
Wells Fargo allows them to exploit more people, more efficiently
than their cruder, older brethren, racism remains at the heart
of the game. Indeed, it can be argued that the African American
community has always been the concentrated customer base for
American predatory lending. According to a 1991 Federal Reserve
Board study, Black applicants received less than one percent
of home loan mortgages approved between 1930 and 1960. Presumably,
folks scrapped together the necessary capital from a variety
of sources, many no doubt super-exploitive.
Credit
a salary can’t buy
In shocking numbers, today’s higher wage earning
African American households find themselves relegated to the
same subprime “apartheid” mortgage terms as poorer Blacks. An
ACORN report on home loan bias in 2002 showed “racial
disparities remain when comparing white and minority borrowers
in the same income groups and are most pronounced for
upper-income borrowers. Upper-income African-Americans were
2.83 times more likely to be denied [mortgages] than upper-income
whites, while upper-income Latinos were 2.13 times more likely
to be denied than upper-income whites. “ Thus, the racial equity
gap persists even as Black salaries creep (excruciatingly slowly)
toward white household levels. For Blacks in general, ACORN
found that “applicants for conventional (non-FHA or VA) home
purchase loans in 2002 were 2.38 times more likely to be denied
than white applicants, a slight increase from 2.31 times in
2001.”
The mega-banks play the loan shark game with both
hands, disproportionately rejecting Black applicants for prime
rate loans, then referring them to subsidiaries for the fatal,
subprime embrace. “People begin with Wells Fargo Bank, but wind
up getting a call from Wells Fargo Financial,” the high interest
subsidiary, explains Lisa Donner, Director of the ACORN Financial
Justice Center. Co-starring in this corporate charade is the
Office of the Comptroller of the Currency (OCC), the Treasury
Department agency charged with making sure that national banks
don’t cross the line into subprime. Instead, the OCC zealously
shields Wells Fargo, Citigroup and the rest from regulation
and investigation. “The OCC has been very aggressive in saying
not only that they are the regulators of national banks, but
that they are the only regulators,” said Donner following
a recent meeting with the agency. “Are they going to be the
protectors of predatory lending or do something about it?”
It’s a rhetorical question, of course. Donner
describes a banking environment that behaves as if it’s “all
subprime, all the time,” while the OCC blandly insists that
it just isn’t so, and ferociously guards its solitary powers
of enforcement.
Every criminal has his shyster. In the Congress,
the national predatory bankers’ point man is Ohio Rep. Robert
Ney, the Republican statesman best known as the guiding force
behind changing House cafeteria “French fries” to “Freedom fries.”
To safeguard against the terror of local legislators, Ney’s
Responsible Lending Act would “pre-empt” any state or local
law regulating lenders “irrespective of whether such laws afford
additional substantive protections." Ney’s bill "allows
lenders to do anything they want without any meaningful limits
at all," said Margot Saunders, of the National
Consumer Law Center, in Washington, DC.
Pre-emptive injustice
When it comes to capital rights, state’s rights
don’t stand a chance in the national Republican Party. The banks,
having herded too many customers into their high interest Bantustans,
are running scared. States as diverse as New York, North Carolina
and Georgia have enacted their own anti-predatory lending laws,
and anti-“pre-emption” resolutions have passed in Pittsburgh,
Boston, Albuquerque, Philadelphia, New York, Bridgeport, Santa
Fe, Providence, Washington D.C., and Prince George's County,
Maryland. As the list grows, the bankers arrange their vaults
in a tight circle of greed.
 Excluded,
first, by law and, later, by practice from society’s “A” list
of citizens, African Americans hoped that the homogenizing influence
of big business would act against parochial local prejudice.
The national banks-turned-loan-sharks have betrayed those dreams,
institutionalizing a bias so powerful it shackles even the better-paid
fraction of Blacks in subprime desperation. According to the
Shared
Capitalism Institute, “the net worth of white families was
8 times that of African-Americans and 12 times that of Hispanics.
The median financial wealth of African-Americans (net worth
less home equity) is $200 while that of Hispanics is zero.”
In the United States, net worth is overwhelmingly
linked to home ownership equity. Although Black home ownership
stands at 48 percent (compared to about three-quarters of whites),
collective Black equity is eroded by the terms of the predators
– a lasting negative legacy.
The same banks that masquerade as caring stakeholders
of the cities command their subsidiaries to drain the equity
of homeowners and entire neighborhoods, destabilizing communities
through slow, hemorrhagic death. The people are confronted with
highly organized crime, a well dressed gang that stalks the
unwary, baits and switches with impunity, chokes the innocent
on their own, unfulfilled aspirations, and relentlessly steals
the fruits of lifetimes of labor – all under the protection
of accomplices at the highest levels of government. Since this
is an American crime syndicate, the victims of choice are, naturally,
Black.
And so, too, will be the agents of their destruction.
A people without equity must seek justice through collective
action – outside of a rigged marketplace.
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