Predatory Lenders Target Minorities, Regardless of Income
Feature Story by Teresa Kraly - 5/10/2002There are significant racial disparities in subprime lending that actually increase as income increases, according to a new report released by the Center for Community Change.
The report, "Risk or Race? Racial Disparities and the Subprime Refinance Market" was released concurrently with the introduction of legislation to strengthen predatory lending protection by Senator Paul Sarbanes (D-MD), Chairman of the Senate Committee on Banking, Housing and Urban Affairs. Speaking in support of the legislation, titled the "Predatory Lending Consumer Protection Act of 2002", were Senators Schumer (D-NY), Corzine (D-NJ), and Clinton (D-NY).
Wade Henderson, executive director of the LCCR, called the day "a day for the advancement of civil rights." Predatory lending raises civil rights issues because "shelter is a basic human need and homeownership is a basic key to financial viability." Yet while more Americans own their homes today than any time in history, minorities and others who have been historically under served by the lending industry still suffer from a homeownership gap. Citing the need for immediate action to curb lending abuses, Henderson stated, "Predatory lending is a cancer on the financial health of our communities."
The Predatory Lending Consumer Protection Act would extend consumer protections under current law to more high-cost loans and restrict some loan conditions such as prepayment penalties. Senator Sarbanes, noting Americans’ desire to become homeowners, said predatory lenders use "these hopes and dreams to cynically cheat people, overwhelmingly targeting minorities, driving a wedge between these families and the hope of a productive life in the economic and financial mainstream of America."
"High foreclosure rates for subprime loans are evidence that many borrowers are entering into loans they cannot afford," stated Allen J. Fishbein of the Center for Community Change. "It also means that concentrations of this form of lending in a community can lead to vacant buildings and devastated neighborhoods.''
The CCC’s Risk or Race report concludes that because "high cost subprime refinance loans are now common in every region of the country and are concentrated in African American and other communities of color" there is a critical need to address abusive practices through strengthened consumer protections and greater oversight of the functioning of the subprime market.