Subprime Lending News 7/17/17:
Payday robberies, drama in the auto loan industry, and more lawsuits for Wells Fargo.
City of Philadelphia sues Wells Fargo over predatory lending practices.
The Supreme court ruled in May that cities could sue banks under the Fair Housing Act, and Philadelphia is doing just that. The city alleges that Wells Fargo violated the FHA by “intentionally steering minority borrowers in Philadelphia into discriminatory mortgage loans.” This claim is based on a comprehensive data analysis, which looked at white, Black and Latino borrowers with the same credit score, and found that Black borrowers were 2.5 times more likely to be given a high-risk/high-cost loan than a white borrower with the same score.
Bad credit? Blame your brain.
Find it hard to wrap your head around the idea of credit? You’re not alone. Financial experts say that most people find it difficult to conceptualize the real-life impact of spending digital currency. As a species, humans process their reality mostly through their senses of hearing, feeling, and sight, so divorcing the concept of money from paper or coin currency makes it hard for us to understand the consequences of our spending. As a result, the average American household has more than $16,000 in credit card debt, and climbing. So how do we combat this? USA Today columnist Jeff Stibel recommends using physical tools to bring your digital spending into the real world. “First,” says Stibel, “physically record every purchase. Second, check your balance every morning and write it on the same piece of paper each day. Studies have shown that our brains revert back to our senses when we make an accounting of our finances, and that keeps spending lower.”
Cash advance store in Saginaw Township, Michigan robbed for the second time in three months.
Two men wearing hoods and masks held up the cash advance store Check Into Cash just before 2 p.m. on Saturday, July 15. After indicating to the cashier they were armed, the men took cash from the register and fled in a car. This incident marks the second time in three months that Check Into Cash in Saginaw Township has been robbed, after a very similar incident occurred on May 27. Police do not know whether the two events are related, but the perpetrators of the latest robbery were apprehended and arrested later that same day.
Is the subprime auto loan market headed for a crash?
$26 billion in subprime auto bonds were sold in 2016, a trend which has savvy investors worried about a potential crash. According to Bloomberg, the explosion of subprime auto loans is due to lax and falling lending standards, which allow people to take out large loans without verifying their income, credit history or employment status. While Wall Street has so far been rewarding companies issuing these high-risk loans, all this unverified lending could lead to some serious consequences for both the auto industry and customers who are convinced to take out high-interest loans on cars they really can’t afford.