About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline

32 Hum. Rts. 14 (2005)
Predatory Lending - The New Face of Economic Injustice

handle is hein.journals/huri32 and id is 72 raw text is: Predatory Lending.
The New Face of Economic Ijustice
By Nikitra S. Bailey

Only a few years ago, the
scarcity of credit was a prob-
lem for women, low-income
Americans, and borrowers in commu-
nities of color. Today, because of
advances in technology and changes in
the marketplace, many in these same
populations are bombarded with offers
from subprime mortgage lenders,
check cashers, payday lenders, and
other fringe bankers. Credit in the
United States is now more widely
available than ever before. Yet this
expansion has been accompanied by a
sharp rise in predatory lending, which
undermines the economic benefits of
home ownership and helps perpetuate
the widening wealth gap between
whites and people of color.
Predatory lending occurs when
lenders impose excessive or unneces-
sary fees or steer borrowers into
expensive loans when they could
qualify for more affordable credit.
The costs and fees packed in predato-
ry loans extend beyond reasonable
risk-based pricing. The Center for
Responsible Lending estimates that
predatory lending of all kinds costs
American borrowers $25 billion annu-
ally. The problem has gotten worse as
the subprime lending market contin-
ues to expand.
Today, subprime mortgages repre-
sent the fastest growing segment of
consumer finance. In addition, an
industry of alternative types of con-
sumer financing, including payday
lending, car title lending, and high-
cost overdraft lending, has quickly
expanded. As one indicator of their
proliferation, Sixty Minutes recently
reported that payday lending shops in
the United States now outnumber
McDonald's restaurants.
As fringe lenders become a perva-
sive presence in low-wealth neighbor-

hoods, economic justice concerns
have shifted away from access and to
the terms of credit. White borrowers
tend to be served by banks and other
conventional institutions in the prime
market. In contrast, people of color,
women, and the elderly are targeted
by high-cost lenders. Consider the
case of Ira and Hazel Cheatham. Ira
Cheatham is a seventy-three-year-old
retired veteran who has lived with
his wife, Hazel, in a predominantly

the Cheathams and urging them to
consolidate the loan with their credit
card debt into a single mortgage. The
Cheathams, who apparently had good
credit at the time, were promised an
interest rate between 5 and 6 percent.
However, when the loan papers were
presented, the interest rate was 9.9
percent, with an annual percentage
rate of 11.8 percent. Moreover, their
loan contained ten discount points
amounting to $15,289. The lender

A -ouple in Seattle, Washington. After Chuck Barzen suffered a massive sntroke,
Karen Hammer left her job to care for him. They quickly slid into poverty, facing
credit problems and the loss of their home.

African American neighborhood of
Portland, Oregon, for twenty-one
years. In 2002, when they had nearly
paid off their mortgage, the Cheathams
received a check for roughly $1,000
in the mail from a finance company.
For an older couple living on limited
retirement income, the sudden appear-
ance of this money seemed like a
dream come true. They cashed the
check and in the process took out a
very high-interest loan.
The lender followed up by ,calling

financed these points as part of the
loan, stripping away equity the
Cheathams had earned through years
of mortgage payments. The loan also
contained a prepayment penalty,
requiring the Cheathams to pay the
lender approximately $7,500 to
escape their predatory loan. Cheatham
noted that once he received a call
from the lender when the lender hap-
pened to be right down the street
with a neighbor. It seems clear that
this African American neighborhood

Summer 2005

humanright$

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Contact us for annual subscription options:

Already a HeinOnline Subscriber?

profiles profiles most