“Pink-Lining”: How dubious debt products lure poor women into a trap


Wall Street is capitalizing on the gender pay gap by targeting working women with high debts who add to their financial hardships, according to a network of community activists.

Black women are particularly vulnerable to predatory practices by subprime lenders, whether for home mortgages or short-term loans, according to the activists’ report released Tuesday. They accuse the financial industry of “pink lining”, an indication of the banks’ long-discredited practice of “red-lining” neighborhoods with a black majority.

In an election cycle in which the plight of the white male working class has often been in the spotlight, the report recalls the unequal burden on working women. They make up the majority of workers in the low-wage sector and tend to be part-time, not necessarily voluntary. Around 10 million women are single heads of households; Almost half live below the official poverty line, according to census data.

While red-lining has been denial of credit, the modern equivalent is selling dodgy debt products that trap poor women, says Suparna Bhaskaran, the report’s author. The result is the “transfer of wealth and assets from low-income women and women of color to the financial sector”.

Lorian Smith, an East Orange, NJ hospital worker, is an example of the debt trap. In a conference call Tuesday to launch the report, she told reporters that she lost two jobs in the financial crash and struggled to keep payments on the subprime mortgage on her house that she bought in 2001. She eventually received a loan modification but says she is still worried about the foreclosure.

“I played by all the rules,” she said. “I did an apprenticeship. Made a career. Bought a house. Raised a family. But … debts have become a vicious circle in my life. “

Many of the claims in the report are well known, particularly those related to the subprime mortgages that fueled the housing boom of the 2000s. Lenders at the time were accused of directing minority borrowers to more expensive loans, even if their creditworthiness qualified them for cheaper deals. Car finance has also been investigated by federal regulators: The Consumer Financial Protection Bureau (CFPB) Toyota fined and other companies for racial discrimination in car loan pricing.

The newest priority, say activists, is payday loans. The CFPB recently proposed new regulations for the payday loan industry, which serves millions of customers with short-term debt that can become prohibitively costly. The proposed rules impose restrictions on subscription on lenders, but do not limit the interest rates they charge.

The CFPB should enact the strictest rules for payday loans, says Amy Schur of the ACCE Institute in California, one of the three community organizations behind the “Pink Lining” report. She also called on the agency to investigate how women are profiled by the financial industry and to pursue discriminatory practices.

That could prove difficult. Low-income households with low or poor creditworthiness represent a lucrative market for banks and payday lenders. The fact that women are more likely to live in these households and borrow at high borrowing costs does not mean that lenders are discriminatory unless they can be shown to have more demands them as equal male borrowers.

In 2005, at the height of the real estate boom, one in three women got a subprime mortgage versus one in four men, according to the Center for Responsible Lending, a North Carolina-based advocacy group. When checked for income and creditworthiness, women were at least 30 percent more likely to sell such loans than men, the group found.

“People of color and women are paying significantly more for the same loan from the same background and credit history, and we have to stop this,” Minnesota Rep. Keith Ellison, D, and a member of the House Financial Services Committee told reporters.

Activists say they understand that lenders need to be profitable and that women need access to credit. They say their campaign to hold Wall Street accountable goes hand in hand with a broader progressive agenda for workers, including higher minimum wages and paid parental leave, that would pave a way for women and women of color to build wealth and increase debt catch escape.

“We’re not asking that people be excluded from this market, but that the rules and regulations be written responsibly,” said Andrea Flynn, researcher on women’s issues at the Roosevelt Institute who joined the call.

Studies of payday lenders have found they are more likely to open business in predominantly African American and Latin American neighborhoods. Lenders have denied targeting minorities, saying locations are based on demand and convenience.

To test these claims, Jim Hawkins, a law professor at the University of Houston, compared lender advertisements for paydays and auto titles in Texas to their customer base. In a 2015 study He found that women and minorities were more likely to be featured on their websites by lenders. By race, whites make up 58 percent of credit customers in Texas, but were only featured in 35 percent of online advertisements. For blacks, the situation was reversed.

“This is who they are targeting. They advertise to target specific people, “says Hawkins.

Women make up 52 percent of payday borrowers in Texas, while 63 percent of the pictures on payday websites were of women. However, Hawkins said the comparison was made difficult by the fact that advertisers could use women to market men, as they do with other consumer products.

The pink lining report uses survey data collected by ACCE, Isaiah, a Minnesota religious group, and New Jersey Communities United, based in Newark. It includes statements from some of the 771 respondents in and around Los Angeles, Minneapolis, and Newark. Many said their debt problems – student loans, payday loans, and mortgages – had a negative impact on their physical and emotional health.

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