What is Predatory Lending?

Executive Summary

• Predatory lending has been on the rise as laws against usury have been removed and circumvented.

Introduction

Private banks open predatory lending outlets in lower income neighborhoods. They don’t have the name of “banks” but names like “Fast Title Loans.” However, they are backed by private banks. They charge extremely high interest and oppressive terms for money that can lend only because the government allows private banks to create money. The FDIC defines predatory lending in the following quotation.

“The FDIC defines predatory lending as 1) making unaffordable loans based on the assets of the borrower rather than on the borrower’s ability to repay an obligation; 2) inducing a borrower to refinance a loan repeatedly in order to charge high points and fees each time the loan is refinanced (“loan flipping”); or 3) engaging in fraud or deception to conceal the true nature of the loan obligation, or ancillary products, from an unsuspecting or unsophisticated borrower (FDIC 2007).” – The Public Banking Solution

Source: The Public Banking Solution

https://www.amazon.com/Public-Bank-Solution-Austerity-Prosperity/dp/0983330867

Predatory lenders are continuously pushing for more leeway in mistreating and deceiving customers. Predatory lending is an enormous drag on lower income areas, exacerbating problems. Private banking interests fund large lobbying and PR efforts to put a pretty face on ugly practices. How payday lending deceives its customers is explained in the following quotation. “Existing data show that, in at least two significant respects, the payday lending market does not function as advertised. First, payday loans are sold as two-week credit products that provide fast cash, but borrowers actually are indebted for an average of five months per year. Second, despite its promise of “short-term” credit, the conventional payday loan business model requires heavy usage to be profitable—often, renewals by borrowers who are unable to repay upon their next payday” – Payday Lending Report

This fits into a pattern displayed by private bankers whose intent is never to have loans paid off. What can’t go without mention is that the minimum wage in the US is not a livable wage. There is a clear connection between predatory lending and the minimum wage level. Monied interests argue against the minimum wage increase to a living wage and lobby for expansion of the predatory lending sector, which then preys on minimum wage earners. If the government created its own money, the predatory lending sector could be put out of business. Loans would be available from the government without interest.