Posts Tagged ‘usury’

The Poverty Business

August 17, 2008

  Interesting how one thing leads to another in life. I posted an article on Columbus’ biggest problem, poverty. Then I learned that it’s not only a problem but a business opportunity, because poverty can be profitable. In fact, according to what I heard on Bill Moyers Journal, it is a 600 billion dollar a year industry. That’s right; the lowest 25 percent of the American socioeconomic sector provides that much money.


  An article in Business Week, “The Poverty Business,” points out how the poor are paying so much more for loans than higher income people.


 Federal Reserve data show that in relative terms, that debt is getting more expensive. In 1989 households earning $30,000 or less a year paid an average annual interest rate on auto loans that was 16.8% higher than what households earning more than $90,000 a year paid. By 2004 the discrepancy had soared to 56.1%. Roughly the same thing happened with mortgage loans: a leap from a 6.4% gap to one of 25.5%. “It’s not only that the poor are paying more; the poor are paying a lot more,” says Sheila C. Bair, chairman of the Federal Deposit Insurance Corp.


  Moyer says loan sharks have always been around. The loan-shark industry justifies the usurious interest rates on the grounds that lower income people are a higher risk. However, the industry has put on a new face in some instances.


  There are used car lots that cash in on the poor. One such lot was featured on the Journal. You don’t see any prices displayed on the cars. That’s because price is not even discussed until a profile on the customer is recorded. It goes into a software program which quickly tells the salesperson the max that the buyer can pay. Once the deal is made, the odds are good that the buyer will not be able to afford the payments very long. The car will be repossessed and sold again. Bottom line: a good bottom line.


  Emergency rooms have to treat people whether they can pay or not, but they have the right to try to collect. Some hospitals are turning this over to loan companies. The companies buy the accounts and collect the money at high interest rates. So many American don’t have health insurance that there is money to be made this way.


  So you could say there is a bright side to poverty. You just have to know how to exploit it. Instead of being considered a problem, it could be considered an opportunity. After all we are talking about a 600 billion dollar industry. Of course, it means you can’t afford the luxury of a conscience, or of “doing the right thing” by your fellow human beings. Wait a minute, some might say, those who lend money to the poor are helping them.  But then, there is the argument that when you charge predatory rates what you are doing is helping them do it stay poor and even become poorer.