Magazine article Nation's Cities Weekly

The High Cost of Defending the Poor from Land Sharks

Magazine article Nation's Cities Weekly

The High Cost of Defending the Poor from Land Sharks

Article excerpt

If you're like me, you'll be grousing about nightmare tax rules and the assault on your bank account as you seal up your income tax return and fire it off to the IRS this week.

But take heart. It could be a lot worse. You could be poor.

Poverty is not just miserable, it's actually expensive, the Annie E. Casey Foundation asserts in its "KidsCount" report. The foundation documents how every outlay--from food to rent to loans to health coverage to check-cashing or a car for commuting--is likely to cost you an arm and a leg more if you're a low-income American.

Some of the conditions can't be fixed quickly--food prices up to double suburban rates in some inner cities that have been deserted by supermarkets, for example. Or rents so high that more than 5 million families are now obliged to spend over half their entire incomes for shelter.

But there's a depressingly long list of predatory fiscal devices that have ballooned in number since 1990. Collectively, they're tipping off low-income America, trapping millions of poor Americans in permanent, high-cost indebtedness.

"Land Sharks Circling" is the name of a paper by Debby Goldberg and Allen Fishbein for the Washington-based Center for Community Change, showing the phenomenal growth of predatory lending practices.

First they describe fringe banks--uninsured, nondeposit institutions, lightly if at all regulated, often charging families excessive fees and interest. As neighborhood branches of mainstream banks have dwindled in number, fringe banking has grown fast.

One big practice: subprime mortgage lending marketed aggressively to borrowers who have poor or no credit history.

Subprime loans are typically offered--at high interest, with extremely high fees--to consolidate consumer debt or finance home repairs. They carry a high risk of foreclosure. …

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