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

Instead of receiving reasonable interest rates or regular loans, they were redirected to apply for subprime loans. Why would the brokers do this? Ironically, there are no laws against a mortgage broker asking a borrower’s race, or a borrower refusing to select race identity on a loan application. As a matter of fact, if a borrower refuses to select their ethnicity on an application; brokers are inclined to guess the borrower’s race to be in compliance with the Home Mortgage Disclosure Act. This is a requirement to ensure mortgage lenders are not discriminating based on race. Hence, mortgage lenders have the right to guess a borrower’s race based on the physical color of skin.

Mortgage fraud is one of the costliest, yet seldom prosecuted crimes in the criminal world. CoreLogic estimates approximately $13 billion in fraud losses occurred in 2012, according to the latest available data in the 2012 Mortgage Fraud Trends Report (Gerding, 2013). While these numbers may seem high, the approximate $13 billion in losses is only a fraction of what it would be if every case were to be prosecuted. Mortgage fraud was also a major contributing factor towards a national, and nearly global economic collapse in 2008 when the United States economy saw the worst recession it has seen since the great depression. Anyone that has seen the films “99 homes” starring Andrew Garfield and Michael Shannon or “The Big Short” starring Christian Bale and Ryan Gosling has seen a largely realistic glimpse of mortgage fraud and how devastating it can be.

As indicated by news reports, the City of Philadelphia has began lawsuit against Wells Fargo and Co., claiming that the bank has damaged the Fair Housing Act of 1968 by using predaceous loaning practices toward minority borrowers. In Wells Fargo's case, the bank is charged with have denied interest loans to financially sound borrowers simply because of their race or the neighborhoods in which they lived. Allegations in the grievance affirm that Wells Fargo Bank, which is based in San Francisco, steered African Americans and Hispanic borrowers into riskier loans with higher interest rates despite the fact that they met credit requirements for lower-interest and lower-risk mortgages.

building in minority communities and helped trigger the foreclosure crisis that is wiping out the

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

Michael Hudson tells the stories of victims with many compelling storied who were tricked into signing up for risky high-cost loans, as well as the greedy lenders who scarified the lives of their victims to gain as much money and power as they could. Hudson begins his story with an explanation of deregulation and the resulting emergence of subprime mortgage lending firms in California. Roland Arnall was a pioneer of the S&L industry, and Hudson traces how Arnall’s lending operations grew into the nation’s biggest subprime lending empire, Ameriquest.

While reading “Me, The Other Scott, And Payday Loans” from MacLean’s magazine, I had mixed feelings towards the article. Prior to reading, I was initially unaware of what exactly payday loans were and subsequently did my own research to follow up. After reading the article, I began to question the integrity of payday loans, skeptical of the idea of taking a loan out with 400% - 500% interest. On one hand, I believe it’s entirely on the consumer to make educated decisions regarding financial terms; however, it’s also understandable why someone would feel inclined towards taking out these loans when they’re in desperate needs of funds. Furthermore, payday loan companies know exactly who their target customer is, as it is blatantly obvious through

“The best candidates for predatory lending have been found in the poorest areas of the country” (Keren, 67.) Individuals in these distressed urban communities, signed predatory housing loan agreements based on various circumstances. Housing loans were sold through market negotiations and were based on securing the consent of the borrower (Keren, 68.) Lenders persuaded borrowers from these neighborhoods that had once been denied mortgage loans, to borrow more than they were ever able to repay. Keren gives an example of an immigrant who was pressured to take a loan that he was unable to repay, he was reassured that he’d be able to pay back the loan through the income from his tenants, which the lenders offered to help him obtain. The borrower was overwhelmed with stressed, suffered from a heart-attack, ultimately, he became unemployed and his property was foreclosed (Keren, 68.)

Predatory lenders are organizations, which offer loans with high interest rates to those who are in need of fast money, usually because of an emergency. Engel Kathleen, and Patricia McCoy, in their paper “A tale of three markets: The law and economics of predatory lending” defined predatory lending as Any serious attempt to address the problem of predatory lending, however, must be able to describe it. “predatory lending generally has been described as a catalogue of onerous lending practices, which are often targeted at vulnerable populations and result in devastating personal losses, including bankruptcy, poverty, and foreclosure. ” which essentially means that while the methods of predatory lending have changed over the years, the concept of predatory lending has remained the same. Predatory lenders used to be loan sharks, who would loan people money from the local mob, but now predatory lenders operate as payday loan offices, and Car Title loaners. These companies utilize the niche market of people living in low-income areas, who are desperate for quick cash and have stable paying jobs, and a willingness to pay the flat fees associated with said loans. Loans such as Payday Loans and Car title loans operate by preying on those who have no other alternatives. Predatory lending practices have had a predominately negative effect on lower income communities, forcing many families living in these communities to go into deeper debt trying to pay off the initial loan, leading

The state’s lawmakers felt that borrowers would always need small loans, and banning them would only make consumers turn to riskier finance schemes such as borrowing from unscrupulous lenders and organized criminals. The state now permits these lenders to make reasonable profits by charging higher interest rates “to allow lenders who meet the conditions of this chapter a rate of charge sufficiently high to permit a business profit.”

Banks made the practice even riskier by often lying about a borrower's income so automated systems would approve them for a loan (Cassidy, 2009: 244-245). Banks had no problem doing this because they had found a way to pass the risk off of themselves. Wall Street investors had become interested in the high interest rates associated with these mortgages and the potential for a high-yield (Cassidy, 2009: 253). Wall Street investors would buy mortgages off of the bank's’ books, assuming the negative consequences if a mortgage were to default (Cassidy, 2009: 245). As a result, banks no longer had an incentive to really investigate who was applying for mortgages or monitor their activity once they were taken out (Cassidy, 2009: 256-257). As the boom went on, this behavior persisted as Wall Street offered more and more for mortgage securities and banks were under pressure to give mortgages to anyone they could, no matter the risk (Cassidy, 2009: 258). Banks often engaged in predatory lending to achieve this goal, which meant they tricked or confused borrowers to take out loans they didn’t fully understand (Cassidy, 2009:

Finding of fact #1: The first finding of fact in this case involves corruption in the company.  According to Sylvia Vega-Sutfin, a former employee of BNC, the bribes known as spiffs are common in the company. She states that most of the underwriters in the company demanded bribes so that they can approve the loans. These claims of corruption or bribery are supported by Colombo, who claims that one of her fellow employees, a male wholesaler, brought her loans with questionable information such as incorrect salaries and home values, and that the male wholesaler even tried to bribe her so that she can allow a loan with incorrect information to be approved.