Predatory Lenders : The Law And Economics Of Predatory Lending

The world is full of financial hardship, and American society possesses a great deal of controversy concerning lending. Unfortunately, short term lending, such as payday loans or title loans, creates a structural void within American society. According to Wikipedia, “Structural inequality is defined as a condition where one category of people are attributed an unequal status in relation to other categories of people” (wilipedia.com). When working class Americans apply for a payday, the unequal status between upper and middle class possess a bigger separation financially. The never-ending process of a short term financial fix becomes lifelong debt. Thus, middle class society becomes lower class society. Eventually, working class society will struggle to say above the poverty line. In addition to an imbalance in society classes, short term lending targets consumers who life paycheck to paycheck. In Rigging the Game by Michael Schwalbe, the author explains the reproduction of inequalities. Schwalbe discusses the different kinds of capitals human, social, and cultural (10). The three capitals unknowingly shape Americans social system. Many businesses capitalize on these capitals knowing no laws or regulation exists to stop them from capitalizing on individuals who no faults of their own were born into these unfair capitals. As a result, short term lenders possess the ability to have extremely high interest rates and outrageous fine print penalties because there is little

Predatory lending has caused many conflicts in the American society. Victims who fall for predatory lending are

I am going to look at one of America's most resilient industries. The Predatory lending better known as Payday loans, and even sometimes pass as car lenders and mortgage lenders. One in twenty households have taken one out at some point. And is estimated to be a nine billion dollar industry. With payday loan outlets are all over the place. The ethical question comes into place. When you question whether if receiving one of these loans can be a benefit or drag the person signing into the loan deeper in debt. Im very interested on this subject because I believe that payday loans can be very useful and benefit the general public, if we put in place very specific laws and restrain what lenders can do making sure that there is

Through the use of false promises and sneaky sales tactics, borrowers are convinced to sign a loan contract before they have had a chance to review the paperwork. If the borrower is allowed the chance to go over the fine details of the contract, a significant amount of the borrowers targeted by predatory lenders haven 't been updated enough to really understand what they are signing. In most cases, sub-prime borrowers do not hire attorneys to represent them. They either don 't have the cash flow to do so, or they are not made aware of the opportunity. An example of the predatory lending practice of high interest rate financing is as follows:

If a poor family of five suddenly has their refrigerator break they will think that their only option is to take out a short term loan to be able to afford to fix it. They end up paying ridiculously high interest rates over a long span of time, forcing them to pay over five times what they needed in the first place in some occasions. Another example of this is financing offered by major companies, an average iPad would normally cost under six hundred dollars upfront, but the company Apple offers a family looking to purchase one a weekly payment plan for a year and a half. After seventy-eight weeks the family can end up paying just slightly under two thousand dollars for the same iPad. The poor often don’t trust banks either, this is because of a combination of factors. They take their loans out at banks if they’re lucky enough to be approved, with APR, annual percentage rates, as high as six hundred precent. Even though these loans are meant to take weeks at a time at most to repay, researcheers have found the on average poor families take up to nine of these loans and end up being indebted for over a year! They do not read or understand the terms and conditions that they decide to sign. Banks also charge overdraft fees for the poor who already had trouble managing their money, as well as banking fees if they cannot meet the monthly minimum account balance.

The purpose of this report is to inform you, the RSGs, about how the ethics of payday loans should be considered before moving on with your project. After you raised many concerns about whether or not ethics are an issue, Vice President Bette Davis decided to bring the CRC in to help out here. Davis wanted me to research the issue of the ethics of payday loans, and report back to her on with the information I found in order to help her decide how to resolve the issues between the RSGs. I first wrote a memo to Davis on how the CRC could help with doing the research and writing the report. I then wrote an annotated bibliography to Davis explaining the sources that I would be using and how they would be beneficial in the final report. I then presented to you about how this would help you resolve your issues. After you approved of what I had to say, I wrote an outline for the final report and submitted it to Davis. After completing all of my research, I have come to my conclusion and will inform you about it in this report. It will help you to come to a consensus on whether or not the ethics of payday loans are an issue.

The primary importance that Constance Ruzich and A.J. Grant attach to metaphor, particularly in the metaphor of predatory lending which is prevalent throughout banking and mortgage industries, is that it aids in the facilitation of understanding. Metaphors allow a person to replace something that is incomprehensible or difficult to understand with something that is considerably more familiar, and therefore easier to understand. Consequently, metaphors become an integral part of communication of ideas since they enable people to relate a relatively foreign concept to one that they can better grasp since they already know it. This notion is especially important in regards to a concept such as formal lending, which largely lacks a formal, standardized definition according to Ruzich and Grant's journal article entitled "Predatory Lending and the Devouring of the American Dream". The authors sufficiently explicate this idea in the following quotation. "When California attempted to devise a legal definition of the term"¦consumer groups argued both that the definition was too vague and that it needed to be broadened (Sichelman). Without a legal definition, the metaphorical implications of the term become even more significant" (Ruzich & Grant, 2009, 627-628). By stating that the "metaphorical" connotations of predatory lending are "more significant" due to the fact that there is not a legal definition of this phrase, the authors are placing a greater emphasis

What must be done to stop this? What can be done? According to an article, “The Great College-Loan Swindle” written by American author and journalist Matt Taibbi for Rolling Stone most adults, upwards of 40 million approximately, are now still living with unpaid college loans circling their heads, it's a price they were willing to pay for a good education. With some people only being able to go to college because of student loans, some take out more than they can afford, and because they are not not able to file for bankruptcy for student loans those loans will most likely follow them forever.

Unlike in the past when we have tried to influence legislators, we would target borrower stories toward the public. This strategy would start with ad campaigns of our consumers explaining how payday lending was their only choice and helped them provide food, water, and housing for themselves and their families in times of need. Eventually, we would shift the campaign to social media with the goal of personalizing payday lending for Ohio residents. We know that over one in ten adults in Ohio use payday loans and have positive experiences, but many in the public do not recognize this. If someone’s cousin, neighbor, or friend were to share their experience it would be significantly more likely to sway opinions than just another ad from “rich” payday lenders.

Americans who need a short term loan to repair a car, fly quickly to a stick relative beside or catch up on child care payments even find themselves going to payday lenders ether online or trough one of the thousands of payday lending store fronts. (Wherry) using online is a way to pay or catch up with your due date of the payment that you owe. Having someone that can help you with a payment is a payday lender that can help you with a car payment also paying your rent or buying food or also buying a new sofa. Nationally borrowers spend roughly 8.7 billion per year on payday loans fees and what might start as a 500 lifetime can become a heavily burden. (Wherry) having a borrower that lend you a loan can be easy but it’s time to payback that is when it became complicated. Also having a fee is very complicated because they pressure you to pay back when you miss your due date. Annual interest rates for payday loans typically run between 391 and 351 percent a cording to the center for responsible lending and most people who use them end up paying more in fees over the course of the year than they originally received credit. (Wherry) annual rates are very high in percentage because of lending tem money and not paying back on the due date. Having these huge percentages are too much but when you borrow more than you need the more you ending up paying than the last

In the newspaper article, Me the Other Scott and Payday loans, Scott voices his opinion that payday outlet companies are on the edge of committing fraud. Payday Loan companies constantly feed off of those families living with low to middle income, who can barely afford continuous asset payments, leading to advance payday loans being the only possible resort. Payday loaners are just skimming legality lines when over charging interest rates to those who are in desperate need. Those who have no other choice eventually have to pay off the loan plus an additional cost to borrowing the loan in the first place, falling into a continuous cycle of debt. The government sets up those living in lower to mid income to be trapped in a never ending cycle

The Truth in Lending Act (TILA) protects one against inaccurate and unfair credit billing and credit card practices. It requires lenders to provide you with loan cost information so that you can comparison shop for certain types of loans. People have a right of rescission for loans covered under TILA, which allows you three days to reconsider your decision and back out of the loan process without losing any money. This right helps protect people against high- pressure sales tactics used by unscrupulous lenders. Companies that would lend you money are under certain obligation to provide you basic information about the loan in clear and understandable terms. The most commonly

With payday lenders out numbering other local stores and restaurants it is allowing them to be at every corner in low-income neighborhoods making it convenient and pushing banks out of the area. For example, straight out of the book it describes how McDonald’s has only 13,500 U.S. restaurants, Burger King has 7624, Target has 1,250 stores, Sears has 1,970, J.C. Penney has about 1,000 locations, and the entire Wal-Mart retail chain includes about 3,600 U.S. outlets. All of these combined 29,000 locations are fewer than the nation’s 33,000 check cashing and payday lenders, just two sectors of the fringe economy.

It is no secret that tens of millions of homeowners got into trouble with predatory home mortgages. Tens of millions of them have MERS-originated Mortgages. If you asked the average mortgagor on the street if they knew what a “MERS-originated Mortgage” was, they couldn’t tell you. They don’t know because they weren’t told at closing that the “funds” they were receiving to buy their (generally over-appraised) home may NOT have come from the source named on their Mortgage or Deed of Trust. Instead, the MERS® System was used because the borrowers’ loans were securitized. This “system” was created specifically for that purpose (to track the sale and transfer of loans electronically, in a MERSCORP-owned database, with no regulatory oversight). You can’t believe everything you read either. Due diligence is required here.

Predatory lending is a real issue that really gets overlooked. The fact that those companies can misguide people by lying to the extent where they could lose thousands of dollars, and maybe even their homes is unnerving. A clear solution would have to be more legislation targeting companies who commute predatory lending. This would be difficult though as sometimes the misguided clients do not even know that they are being taken advantage of. As an example from above, a non-native speaker would still have to rely on the seller because of their lack of English skills. The most valuable skill to dodge these shady practices is to be vigilante of both the seller and contract for the loan. Hopefully, in the future being vigilant would not be necessary