The Center for Responsible Lending recently released the first in a series of reports on the impact of predatory lending in the consumer markets. Despite recent regulatory reforms, predatory lending continues to undermine American households trying to rebuild their finances after the recession. The report outlines predatory practices in mortgage lending, credit cards, student loans, and automobile loans that undercut the benefits of these products.
The housing crisis has produced the largest documented wealth gap ever between White households and families of color. From 2000-2010, African-American family wealth dropped 53 percent, while Hispanic families lost 66 percent. By comparison, average White household wealth dropped only 16 percent. The report states:
There is significant evidence that African-American and Latino borrowers and their neighborhoods were disproportionately targeted by subprime lenders. Borrowers of color were about 30 percent more likely to receive higher-rate subprime loans than similarly situated white borrowers.
The study revealed that spillover costs of foreclosures have wiped out nearly $2 trillion in family wealth. Automobile loan interest-rate markups cost consumers nearly $26 billion each year, and borrowers in lower credit tiers pay up to 68 percent higher monthly payments on private student loans than on safer federal loans. Based on our experience, coming from litigation, lawyers in the firm know that predatory lending harms the entire U.S. economy. Former Federal Deposit Insurance Corporation Chair Sheila Bair gave this stark warning: “If abusive lending practices are not reformed, we again will all pay dearly.” Hopefully, members of Congress, as well as governors and legislators around the country, will read the report.
Source: Center for Responsible Lending
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