Democratic Underground Latest Greatest Lobby Journals Search Options Help Login
Google

Truthout: Living in America's Fringe Economy

Printer-friendly format Printer-friendly format
Printer-friendly format Email this thread to a friend
Printer-friendly format Bookmark this thread
This topic is archived.
Home » Discuss » Editorials & Other Articles Donate to DU
 
marmar Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Dec-29-06 01:38 PM
Original message
Truthout: Living in America's Fringe Economy
Living in America's Fringe Economy
By Howard Karger
Dollars and Sense

Friday 29 December 2006

Ron Cook is a department manager at a Wal-Mart store in Atlanta. Maria Guzman is an undocumented worker from Mexico; she lives in Houston with her three children and cleans office buildings at night. Marty Lawson works for a large Minneapolis corporation. (The names have been changed to protect the privacy of the individuals.) What do these three people have in common? They are all regular fringe economy customers.

The term "fringe economy" refers to a range of businesses that engage in financially predatory relationships with low-income or heavily indebted consumers by charging excessive interest rates, superhigh fees, or exorbitant prices for goods or services. Some examples of fringe economy businesses include payday lenders, pawnshops, check-cashers, tax refund lenders, rent-to-own stores, and "buy-here/pay-here" used car lots. The fringe economy also includes credit card companies that charge excessive late payment or over-the-creditlimit penalties; cell phone providers that force less creditworthy customers into expensive prepaid plans; and subprime mortgage lenders that gouge prospective homeowners.

The fringe economy is hardly new. Pawnshops and informal high-interest lenders have been around forever. What we see today, however, is a fringe-economy sector that is growing fast, taking advantage of the ever-larger part of the U.S. population whose economic lives are becoming less secure. Moreover, in an important sense the sector is no longer "fringe" at all: more and more, large mainstream financial corporations are behind the high-rate loans that anxious customers in run-down storefronts sign for on the dotted line.

The Payday Lending Trap

Ron and Deanna Cook have two children and a combined family income of $48,000 - more than twice the federal poverty line but still $10,000 below Georgia's median income. They are the working poor.

To make ends meet, the Cooks borrow from payday lenders. When Ron and Deanna borrow $300 for 14 days they pay $60 in interest - an annual interest rate of 520%! If they can't pay the full $360, they pay just the $60 interest fee and roll over the loan for another two weeks. The original $300 loan now costs $120 in interest for 30 days. If they roll over the loan for another two-week cycle, they pay $180 in interest on a $300 loan for 45 days. If the payday lender permits only four rollovers, the Cooks sometimes take out a payday loan from another lender to repay the original loan. This costly cycle can be devastating. The Center for Responsible Lending tells the tale of one borrower who entered into 35 back-to-back payday loans over 17 months, paying $1,254 in fees on a $300 loan.

The Cooks take out about ten payday loans a year, which is close to the national average for payday loan customers. Although the industry claims payday loans are intended only for emergencies, a 2003 study of Pima County, Ariz., by the Financial services for the poor and credit-challenged are big business. ........(more)

The rest of the article: http://www.truthout.org/docs_2006/122906E.shtml



Printer Friendly | Permalink |  | Top
AliceWonderland Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Dec-29-06 01:47 PM
Response to Original message
1. Important article -- thanks for posting. n/t
Printer Friendly | Permalink |  | Top
 
twilight_sailing Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Dec-29-06 03:50 PM
Response to Original message
2. Thank you
This is one of those things that has been bugging me for years.
Printer Friendly | Permalink |  | Top
 
DU AdBot (1000+ posts) Click to send private message to this author Click to view 
this author's profile Click to add 
this author to your buddy list Click to add 
this author to your Ignore list Wed Oct 01st 2014, 12:12 AM
Response to Original message
Advertisements [?]
 Top

Home » Discuss » Editorials & Other Articles Donate to DU

Powered by DCForum+ Version 1.1 Copyright 1997-2002 DCScripts.com
Software has been extensively modified by the DU administrators


Important Notices: By participating on this discussion board, visitors agree to abide by the rules outlined on our Rules page. Messages posted on the Democratic Underground Discussion Forums are the opinions of the individuals who post them, and do not necessarily represent the opinions of Democratic Underground, LLC.

Home  |  Discussion Forums  |  Journals |  Store  |  Donate

About DU  |  Contact Us  |  Privacy Policy

Got a message for Democratic Underground? Click here to send us a message.

© 2001 - 2011 Democratic Underground, LLC