Socialwork2018

Predatory Lending and Financial SW as a Solution

Predatory lending is any type of loan that benefits the lender and usually harms the borrower through interest rates coded in complicated wording that ordinary people would not be able to understand. Predatory lending victims are typically people who do not have good enough credit to borrow money from a more reputable establishment, such as a bank. Predatory lenders also prey on people who are poor and are in an emergency situation, such as car repairs or medical bills. Common forms of predatory lending are payday loans, title loans and home mortgages. Title loans and home mortgages can be especially dangerous, because if the borrower cannot pay back the money borrowed on top of steep interest rates, their home or car will be repossessed so they lose their money put into the loan as well as their property. Another issue with predatory lending is that most of these lenders, such as title loans, are completely legal and are sometimes necessary means for people in emergency situations with poor credit history. Predatory lenders also target vulnerable communities, such as the elderly and communities with homeowners with poor credit ratings. Predatory lenders knowingly adverstise through letters, phone calls or even door-to-door to lure borrowers into what is schemed as a quick money fix with long-term payments

Who is affected

When asking who are the people who are most affected by predatory lending the answer is that the people of low socioeconomic status. These are people who may be barely making ends meet and then have something unexpected come up or they change jobs and find it more difficult to make enough to keep their heads above water. What is one of the most tragic truths is that those people are exactly who this business model is designed for, which often leads to them having to constantly borrow just to keep themselves going. What predatory lending does is keep people trapped in a cycle of debt. In fact, one study from the Center For Responsible Lending(CRL)found that "a full three-quarters of loan volume of the payday lending industry is generated by borrowers who, after meeting the short-term due date of the loan, must re-borrow before their next pay period." In addition to which payday lenders often have fees that the customer is not aware of when they enter into the loan agreement. Which is how you find that "The 59 million churned loans per year by the national payday lending industry cost borrowers $3.5 billion in fees"

<Parrish, L. and King, U. (2009). Phantom Demand: Short-term Due Date Generates Need for Repeat Payday Loans. http://www.responsiblelending.org/research-publication/phantom-demand-short-term-due-date-generates-need-repeat-payday-loans>

Video

This is an extremely well-researched report by John Oliver of HBO and it explains everything that has already been mentioned previously and makes it humorous so it is more likely to be remembered. If nothing else really grabbed you from this wiki than this is definitely a viable option to get you invested in the topic of predatory lending. The truth is that it is not a matter of protesting or writing to your lawmakers. Both of those are excellent options if change is being sought after, but if nothing else everyone needs to make themselves aware of how destructive these agencies can be at the very to protect themselves.

"https://www.youtube.com/embed/PDylgzybWAw"