The industry has an incentive to seek out borrowers who are more likely to get in trouble

[dajoki]

Attracting Young Voters with Debt Relief

The sub-prime mortgage scandal is only part of the debt problem in the United States. The issue is likely to attract the attention of young voters this election cycle, which may be the key to bringing about change.

Anya Kamenetz | September 17, 2007 | web only
http://www.prospect.org/cs/articles?article=attracting_young_voters_with_debt_relief


Debt is the new four-letter word. As the credit-fueled housing bubble comes ever closer to bursting, Democrats in Congress and on the stump are denouncing predatory lenders and their "Wild West" ways. The potential industry blowback extends far beyond NINJA (no income, no job, no assets) mortgages and "liar loans." A whole new debt-industrial complex -- high-interest payday loans, deceptive credit card practices, creditor-friendly bankruptcy laws, and an oversubsidized student loan business -- is undermining Americans' economic security.

Access to capital through flexible, fair credit lets responsible people make needed investments, whether in a home, a new business or a college degree. Overabundant, high-priced, high-pressure credit turns good investments into unacceptable risks. We need to restore that ugly word usury to describe some of the prevalent lending practices of today, along with the principle that creditors share a responsibility with borrowers. Halting abuses like 500 percent interest on payday loans and universal default on credit cards (where one late payment is enough to raise interest rates on all your cards) won't be enough to restore the listing foundation of middle and working class economic security, but it will at least reduce the insult of exploitation added to the injury of inequality.

The looming question is what will happen to our consumption-fueled, flat-wage economy when the leaky faucet of easy credit is finally tightened. Recession, foreclosures, bankruptcies, and abandoned educational dreams are all on the menu of possibilities. Credit card delinquencies are up because people are finding it harder to use their home equity to pay off debt, and an increase in the bankruptcy rate may follow.

Perversely, people with poor credit are apparently targeted with more credit card solicitations than the squeaky-clean. High interest rates, penalties and fees are so lucrative that the industry has an incentive to seek out borrowers who are more likely to get in trouble. According to a study by Mintel International Group, cited in the Boston Globe, "Direct-mail solicitations to subprime borrowers were 41 percent higher in the first six months of 2007 than they were in the first half of 2006. At the same time, solicitations to the most credit-worthy consumers fell by 13 percent." Similarly, a recent survey by the Consumer Bankruptcy Project showed that families reported receiving an average of more than fourteen credit offers per month one year post-bankruptcy -- compared to just six offers per month for the average American.

[Forkboy]

1. That's all business in a nutshell.

Love it or leave it, eh?

[dajoki]

2. oversubsidized student loan business ...

is what got my daughter. "Loan To Learn" is the most crooked outfit I have ever seen.