The poor have always paid higher interest rates. But not as high as now. 25 percent on car loans. 30 on credit cards. 500 percent on payday loans. Rates so high that the poor have now become one of the juiciest business targets in America. And they are getting juiced.
This week, Business Week's cover story's headline is "The Poverty Business," and it's all about American companies zealously targeting America's working poor as a new profit center - with sky-high interest rates and "gotcha" deals that no self-respecting middle class American would dream of taking. Their business formula? Need plus desperation equals big, fat profits.
Listen to a conversation with one of the article's co-authors on On Point.
What do you make of America’s working poor as a booming new profit center?
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Comments: 24
Seriously,
I pay 25% interest on my car loan
I pay 15% interest on my mortgage
I pay the same car insurance rates as a 16 year old newbie driver for PLPD
(I have never had a ticket in my entire driving career of 27 years, but my credit rating is low; mortgage is not reported on my credit...private company)
I was once caught in the payday loans thing after my daughter needed some out of pocket medical costs, but luckily I am unable to qualify for them now because I can't afford the fees for a checking account!
I am not alone, there are many people who are in this trap, and like quicksand, the more we try to get out, (3rd job, education, etc.), the further down we sink! Thanks!
I happen to have a credit score in the high 700s.
Compare what my rates are to Genine and see how evil this actually is:
I pay 4.5% interest on my car loan through my credit union.
I pay 6.25 % interest on my mortgage.
I pay 13.2 % interest on one credit card and %12.5 % on the other.
I have full coverage plus a million dollar indemnity on my new pickup. The total yearly bill for that $983 because I get a discount for also having my homeowners through the same company.
People who could use a break can't get it. Now, employers are even using credit scores to determine if they will hire you! The whole thing is sickening :(
The real question is: when will the middle class decide enough-is-enough...
The system has broken down due to collusion between politicians who are in the pocket of the finance industry and the finance industry itself. And those without money or hope of ever having money are being expected to "prime the pump" of an economy that stresses short term over long term survival.
look at the rising stats of foreclosure due to balloon mortgages, and the legal problems of Ameriquest which practiced lying on a vast scale and should no longer be in business. People are not going bankrupt from filling their gas tanks, it happens because of mortgages that never should have been written.
It's interesting that this year's Nobel Peace Prize winner, Muhammad Yunus, founded the Grameen Bank in Bangladesh by making "microloans" to the poor at reasonable interest rates to help them start small businesses, realizing that the poor were not a credit risk just because they have less money. It looks like the bank made $15.21 million net profit in 2005 from this business model.
In this country, however, we prefer to trap the poor in cycles of debt by using sophisticated financial software and exorbitant interest rates, then tut-tut the self-fulfilling prophecy when they can't meet their payments.
There must be a business model in giving the poor in the U.S. a fair shake, if they can make a great go of it in Bangladesh!
This is the practice of charging based on what each person "can" pay. Is this what we are facing regardless of how much we make? Well it is! In New York sine landlords have started asking their tenants to disclose what they make and set the rent increase based on what they make. This practice, any practice where pricing is calculated on an individual case should be illegal! It's not just the poor we should be worried about. It's the entire system. Imagine the day the price of your groceries is calculated at the register based on how much you can afford? That is in practice what is happening today to the poor and one day to all of us.
very compassionate. and how long do you think the average payday loan rep spends on explaining the worst case scenario? Ameriquest actually had agents who put a fixed loan sheet on top of the stack and the rest of the sheets were for balloon rates. Nice.
But with you its always let the buyer beware. Even if the seller is lying? Do you perhaps sell used cars for a living?
This is nothing new. It is the evolution of the capitalist idea that Steinbeck pointed to in The Grapes Of Wrath; where, after the dust bowl had created legions of destitute ex-farmers, employers were increasing profits by exploiting the fact that need plus desperation could equal cheap labor.
Does this not also equal the methodology of the insurance industries? That the more likely you are to need or use the insurance you are applying for, the more you are charged for it; and, conversely, the less you need coverage and the less likely you are to file a claim (most often because you have deep or large financial resources) the less you are charged for it.
Yes, very soon you will have to be wealthy in order to get a job where you can earn wealth. American Employers already act as if they are doing workers a favor by hiring them.
It is very similar to the old water monopolies, because money is like water in our modern day societies. Unless you live on one hundred acres of plantable land, Money is your primary or sole source of food, shelter, transportation and clothing.
Ray L. - All the personal responsibility in the world cannot negate the ability of others to ruin your life.
1. Organizations
2. Health Care
3. Practical Learning/Education
4. Time
In terms of revolutionizing their social status...
''The poor is like the character of a small time character actor in a major film that when a pay day comes, he wil receive 5-10 percent of the agreed price in an uncompromising predicament --loosing lots of the above.
It is like the renaissance... hahaha? (American Literature)
Of course a bank was needed to process and back these loans and that bank was Santa Barbara Bank and Trust. Of course, I wasn't blinded to the fact that the poor, as a group, can sometimes have access to large income streams. Unfortunately, being too lazy to work and too dumb to cheat, I personally could never tap into these streams. But, the banking industry was not blind either. So now they are circling around the opportunites in poverty like dogs around a bone.
What a great country we live in. Maybe this is something Lou Dobbs should get mad about. Will CNN let him do this. After all banking and finance companies our large sponsers of newscasts.
http://www.gather.com/viewArticle.jsp?articleId=281474977266002
How important is Shakespeare when you don't know how to calculate an interest rate? Or how to balance your budget? Or anything like that.
Daniel A., you make an excellent point! I did take a personal finance class, but that wasn't until college. A lot of the so-called "practical" things people should know never get taught in school, which is why I think we are in the mess we are in. I keep hearing, "well, if you have a college degree, you will earn a million dollars more than someone who doesn't have a college degree." If I'm not mistaken, several years ago it was two million more. Now it's down to one million, and I think that is extremely optimistic. I work at a big box store, and so many people have degrees, or are working on them, yet this is the only work they could find. Our economy is changing big-time, and it's more service-oriented right now. With the outsourcing of jobs, unless you go into a career that cannot be outsourced, you'll be working retail just like lots of people. We'll need nurses, but unfortunately, the program is so hard to get into, that a lot of people who plan to become nurses won't make it. One of my friends was convinced she'd be a nurse and make $5,000 a month. She's been in school four years and never made it into the nursing program. She's going to switch to psychology, but she won't be able to do anything with a bachelor's in psych. I expect she'll be running a register in another couple years. And as for the $100K she owes in student loans? Well, that's gonna be hard to pay back on $8 an hour.