It Costs Money to be Poor

Predatory businesses such as pawnbrokers, pay-day lenders, rent-to-own stores, and used-car lots prey upon the poor and heavily indebted. There is a better way.

From Spero News
By John S. Rausch

A row of identical signs arranged like landing lights at an airport repeat the appealing offer: “Borrow $200, Repay $203.” This modern spider-to-fly invitation displayed in front of the office of payday lenders appeals to hard strapped workers who just need a boost till payday. What’s three bucks? Technically, since the loan spans only 14 days, three bucks in this case represents 39 percent interest (APR). After this introductory offer, the second $200 loan will demand a $230 repayment–or 390 percent APR!

Payday lenders, together with pawnshops, check-cashers, tax refund lenders, rent-to-own stores and “buy here/pay here” used car lots represent the fringe economy. The term “fringe economy” refers to those businesses that engage in financially predatory relationships with low-income or heavily indebted consumers by charging excessive interest rates or exorbitant fees and prices for goods and services. Other parts of the fringe economy include credit card companies charging sky-high late payments or over-the-credit-limit penalties, cell phone providers pushing excessive prepaid plans and subprime mortgage lenders hiding the real cost of the mortgage.

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Around the world the poor have fought the money lenders through collective action with institutions like the Grameen Bank and credit unions. These are structures people of faith can explore as more middle class families slide into the ranks of the working poor. Universal health care would save countless families from bankruptcy, while a standard living wage would shrink the pool of the financially desperate. Add to this stricter and enforced usury laws and you create rungs on the ladder for moving up.
The vision: replace the spider-to-fly economy with one permitting a-place-at-the-table for everyone.

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