“I would suggest that we not feign naivete about credit. To assert or assume that you can earn credit by being taken advantage of by someone who is going to charge you 200% on a $2,500 loan is just not the case.”
– Democratic Senator Holly Mitchell
It’s funny the things you remember from your childhood. I was always a reader and in my youth I especially loved poetry, I still do. There was this one poem by an unknown poet I read in my early teens that still resonates with me today. It began, “No one can communicate to you the substance of poverty until you have lived with it intimately.”
I guess it struck such a chord because as a child like so many children in America then as now, I knew what it felt like to be poor. I understood the sadness in my mother’s eyes when we needed more food or medicine for a cold or a new pair of shoes or wanted whatever kids wanted in those days.
Just as I’m sure she understood the disappointment in the eyes of her children when she knew we wanted more to eat, newer cloths, to go somewhere with our friends, but never asked because once we were old enough to understand and know she was doing the best she could—we never wanted to put her in a position to have to say no. Don’t misunderstand me, yes, we were poor but what we did not have in material things were more than compensated for with familial love.
But, I often wonder what would have happened had she had easy access to predatory lenders like the ones that exists today? Would she have succumbed to the temptation of exorbitant interest rates when she was short of money and we needed groceries or the light bill was due and there was no money to pay it or, or, or….
That was a lifetime ago and I will never know what my mother would have chosen had that option been available to her but I understand why people who need, as the old folks used to say, “make a way out of no way,” seek funding from predatory lender today.
These lenders usually target minorities and the poor but not exclusively. They also prey on the elderly and less educated. Although such loans may seem like a viable option in the moment, in the end they typically move desperate borrowers from one financial crisis and leave them in an even worse one. According to reports, some consumer loan companies charge rates as outrageously high as 225 percent.
For this reason, I was pleased to learn during this legislative session, California lawmakers passed a bill to cap interest rates for consumer loans as a way to curtail predatory lending practices in the state.
The bill would cap consumer loan interest rates at 36 percentage points above the main interest rate set by the Federal Reserve. Today, that rate sits at about two percent. And though I still consider this exorbitantly high; it is much better than 225 percent.
The measure would apply to loans between $2,500 and $9,999 and requires lenders to offer borrowers a credit education summary. I, like other advocates of this legislation, am hopeful Governor Gavin Newsom will sign the bill into law.
As encouraged as I am about this legislative effort to curtail predatory lending abuse, I was shocked to learn that critics of the legislation included many Black Chambers of Commerce members (among others) who expressed concern the rate cap could put some lenders out of business and cut off loan options for vulnerable Californians or harm people’s ability to build credit. Really?
It is hard to believe these Black businesspeople do not remember, do not understand, or do not care members of the African American community are the ones most severely impacted by the fiscal abuse of such lenders. In addition, there is no credible, scientific evidence such loans have helped a meaningful number of Black American restore their credit.
And, if the practices aren’t egregious enough in their own right, one study found Black borrowers paid an extra 5 to 11 percent in monthly payments that White borrowers did not have to pay.
To these Black chambers and their members, I say, “You can’t help lift your people up by being complicit in the million and one ways they are being held down.”
If you want to protect jobs, help people build credit, give them more access to much needed money and/or disposable income, why not argue and put your energy into advocating for things of benefit to the Black community like: Higher wages? Fair lending practices? Affordable housing? Lower prescription drug prices? A freeze on rising rental rates? Find your voices and speak out on these concerns.
A study by the nonpartisan Center for Responsible Lending confirmed predatory lending practices “bring down the families and individuals caught up in the cycle of debt they create.”
Maybe from your position in the chamber you’ve forgotten the complexity of the struggle because the air where you are is thinner, fresher, maybe it is a bit easier for you to breathe. But don’t get it twisted, too many Black people still struggle, inhaling the noxious fumes of poverty fueled by underemployment, disparate economic treatment—and, you know the rest of the list . . ., don’t you?
I applaud your accomplishments and recognize you may now be dealing with different challenges, but I encourage you to take time to research this issue. There is nothing redeeming about predatory lending. Absolutely nothing.
Of course, this is just my opinion. I’m keeping it real.