Subprime Lending News 7/25/17:
Woman arrested for payday loan scheme, predatory lending hurting minority borrowers, and the lasting effects of the student loan crisis.
By Caroline Thompson
Why poor borrowers are the the real victims of the student loan crisis, plus info on homeownership and a payday lending scheme gone wrong.
Predatory lending to blame for lagging African American homeownership rates.
A recent report from Harvard University’s Joint Center for Housing Studies found that only 42.2 percent of African Americans were homeowners in 2016, compared with 71.9 percent of white Americans. This gap is largely due to predatory lending practices, which have saddled minority borrowers with more debt and higher fees and interest rates than their white counterparts. After the housing crash, many minority borrowers who once owned homes found themselves with damaged credit and nowhere to turn. Additionally, the high cost of prevents many in urban areas from saving up enough money for a down payment.
Researchers Thomas Shapiro, Tatjana Meschede and Sam Oroso found that homeownership was the single largest predictor of wealth differences among races: “Because whites are far more able to give inheritances or family assistance for down payments due to historical wealth accumulation, white families buy homes and start acquiring equity an average eight years earlier than black families.”
Poor borrowers most affected by student loan crisis.
The U.S. Department of Education is hitting back at borrowers who have defaulted on their student loans, using tactics like wage garnishment, reducing Social Security benefits, and holding back IRS refunds. On the whole, poor borrowers are most at risk for defaulting in the first place, and their lives are more intensely disrupted by these kinds of collection practices. In a recent video report from Reuters, a homeless Philadelphia mother named Lakisha Johnson told reporters that her plans to move out of the shelter into a new apartment with her daughter were crushed after the tax refund she was going to use as a down payment was withheld by the government as payment for her student loans.
Georgia woman accused of stealing $1,000 in payday loan scheme.
38-year-old Katherine E. Adkins of Mayfield, Georgia has been sent to jail on a $20,000 bond for her role in a payday loan scheme which left one victim out $1,000. According to investigators, Adkins asked the victim to take out $1,000 in cash, and gave the victim three counterfeit payday loan checks to deposit into their account. The victim withdrew the money, gave it to Adkins, and was out $1,000 when the checks bounced. Adkins is being charged with second-degree forgery and fourth-degree grand larceny. A hearing has been set for August 17.