Embed Size (px)
Citation preview
The State of Lending in America & Its Impact on U.S. Households:
Cumulative Costs of Predatory Practices
Sarah D [email protected]
Below the Surface: Cumulative Costs of Abusive LendingJune 16, 2015
1. Lending abuses are related not isolated
2. Costs typically measured are just the tip of the iceberg
3. Lending abuses, across product, affect low income borrowers and people of color in particular.
Lending abuses are related, not isolated
Payday Lending
Debt Settlement Services
Subprime Mortgage Lending
Car-title Lending
Student Lending
Lending abuses are related, not isolated
Most consumer are not simply mortgage holders, credit card users, payday loan borrowers or car-title borrowers; they are likely
to participate in more than one of these markets, often at the same time.
Just as a hammer can be used to build a house or take it down, the terms and conditions under which
credit is extended determine its ultimate effect.
The steep costs of lending abuses are just the tip of the iceberg
Excessive Fees and Interest
Debt Traps
Costs Resulting from Default
Opportunity Costs
Ongoing Wealth Disparities
Impact on Financial System
Macroeconomic Costs
Low Income BorrowersProduct Typical Income
Car-title loan Less than $25,000
Payday loan $30,000-$35,000
For-profit College Enrollees
Less than $25,000
Yo-Yo Auto Loan Scams
Less than $25,000
Sustained Overdraft Use
Less than $50,000
Borrowers of ColorAfrican-
American Compared to White
Latino Compared to White
High rate subprime mortgage
2.8 2.2
Payday loan 2.2 1.0
For-Profit College Enrollees
2.8 1.5
Auto loans with dealer mark-up
1.7 n/a
Some populations disproportionately affected
Some places experience repeated lending abuses
1. Lending abuses are related not isolated
2. Costs typically measured are just the tip of the iceberg
3. Lending abuses, across product, affect low income borrowers and people of color in particular.
