Post by blackcrowheart on Jul 3, 2008 13:07:41 GMT -5
Meeks: Native consumers beware: Payday lenders are predators © Indian
Country Today June 27, 2008 Posted: June 27, 2008 by: ElsieMeeks / First
Nations Oweesta Corporation The payday lending industry is mounting quite a
campaign to appear legitimate. It reminds me of the old adage, ''Watch out
for wolves in sheep's clothing.'' It is certainly a fitting analogy. Both
wolves and payday lenders are predators and need to disguise their true purpose.
The payday lending industry is vigorously courting our lawmakers to
facilitate these disguises, giving large campaign contributions and influencing the
process in Washington, D.C. This was evident at a recent hearing of the Senate
Committee on Indian Affairs, convened to discuss predatory lending in Indian
country, where there were more witnesses from the payday lending sector than
consumer advocates. As the chair of the Native Financial Education
Coalition and a spokesman advocating for increased financial education and increased
limits on predatory lenders, I was called on to give background information
for the hearing.
I was looking forward to presenting testimony; however, days before the
hearing, pressure from the payday lending industry prevented that from happening.
I am willing to bet that if you asked a hundred random people if they
thought an annual interest rate of 350 percent is predatory, they would say, ''Of
course!'' Unfortunately, rates of 350 percent per annum are on the low side of
the average rates charged by payday lenders. Credit cards that are charging
29.95 percent are thought of as predatory, but seem favorable when compared
to payday lending rates of 350 percent.
The most common argument that I have heard is that people who borrow from
payday lenders have no other alternative. While that may be true, that is
hardly an argument for charging astronomical interest rates. I do not deny that
some people do find themselves in the occasional desperate situation, sometimes
beyond their control. But I also know that many people lack financial
management skills that help them handle their money. Since predators prey on the
weak, these are the people that payday lenders target and from whom they make
their greatest profit.
This leads me to the next discussion: How do we increase financial education
and provide alternative lending opportunities to those offered by the payday
lenders? One answer is community development financial institutions. These
organizations are leading the way by providing financial education to their
community members, especially in Native communities. Many Native CDFIs,
recognizing the strength of a common voice, have joined the NFEC, a group of local,
regional and national organizations and government agencies whose purpose is
simply to promote financial education in Native communities.
The NFEC has worked with the National American Indian Housing Council to
build the capacity of housing entities to offer financial education, and with
the National Congress of American Indians and the National Indian Gaming
Association to help tribal departments' structure programs to promote financial
education opportunities. Most importantly, we are working with the National
Indian Education Association to institute financial education in schools so that
Native youth will be better equipped to face the financial challenges they
will encounter in today's competitive marketplace.
As for alternatives to payday lending, several Native CDFIs have
demonstrated that it is possible to offer fairly priced products combined with financial
education to help break the cycle of borrowing that many payday lenders try
to maintain to milk their profits. Citizen Potawatomi Community Development
Corp. (www.potawatomi.org), Four Bands Community Fund (www.fourbands.org) and
Lac Courte Oreilles Federal Credit Union (www.lcofcu.com) all offer products
specifically designed for Native consumers who encounter financial
difficulties and have few options other than payday lenders.
At Oweesta, we are working with Native CDFIs across the country to help them
replicate these types of consumer loan products. In the meantime, the best
''fix'' to combat these predatory practices is to pass legislation that would
limit the interest rates of payday lenders. Congress did pass legislation
that limits the interest rate that payday lenders can charge to military
personnel to 35 percent. This shows that Congress understands and acknowledges that
some consumers are more likely to fall victim to predators than others.
In my travels, it struck me how similar the landscape is on the borders of
both military bases and Native communities, especially reservations: payday
lenders and pawnshops as far as the eye can see. Shouldn't all Americans
benefit from the same protections? Especially Native consumers, who have been so
historically underserved by the financial services industry, have been victims
of discrimination and haven't had the opportunity to sharpen their financial
management skills? The answer is an unequivocal YES!
Payday lenders don't lend to provide a service to help consumers. They do it
because it is profitable. Instead of supporting an industry that
capitalizes on financial crisis and lack of experience, why not support efforts to
prevent the problems that create long-term patterns of dependency in the first
place?
Interest rate caps and support for financial education and Native CDFIs
would make it easier for Native consumers to avoid these sly wolves. But will our
lawmakers keep giving them their sheep's clothes?
Elsie Meeks is president and CEO of Oweesta Corporation and chair of the
Native Financial Education Coalition.
Country Today June 27, 2008 Posted: June 27, 2008 by: ElsieMeeks / First
Nations Oweesta Corporation The payday lending industry is mounting quite a
campaign to appear legitimate. It reminds me of the old adage, ''Watch out
for wolves in sheep's clothing.'' It is certainly a fitting analogy. Both
wolves and payday lenders are predators and need to disguise their true purpose.
The payday lending industry is vigorously courting our lawmakers to
facilitate these disguises, giving large campaign contributions and influencing the
process in Washington, D.C. This was evident at a recent hearing of the Senate
Committee on Indian Affairs, convened to discuss predatory lending in Indian
country, where there were more witnesses from the payday lending sector than
consumer advocates. As the chair of the Native Financial Education
Coalition and a spokesman advocating for increased financial education and increased
limits on predatory lenders, I was called on to give background information
for the hearing.
I was looking forward to presenting testimony; however, days before the
hearing, pressure from the payday lending industry prevented that from happening.
I am willing to bet that if you asked a hundred random people if they
thought an annual interest rate of 350 percent is predatory, they would say, ''Of
course!'' Unfortunately, rates of 350 percent per annum are on the low side of
the average rates charged by payday lenders. Credit cards that are charging
29.95 percent are thought of as predatory, but seem favorable when compared
to payday lending rates of 350 percent.
The most common argument that I have heard is that people who borrow from
payday lenders have no other alternative. While that may be true, that is
hardly an argument for charging astronomical interest rates. I do not deny that
some people do find themselves in the occasional desperate situation, sometimes
beyond their control. But I also know that many people lack financial
management skills that help them handle their money. Since predators prey on the
weak, these are the people that payday lenders target and from whom they make
their greatest profit.
This leads me to the next discussion: How do we increase financial education
and provide alternative lending opportunities to those offered by the payday
lenders? One answer is community development financial institutions. These
organizations are leading the way by providing financial education to their
community members, especially in Native communities. Many Native CDFIs,
recognizing the strength of a common voice, have joined the NFEC, a group of local,
regional and national organizations and government agencies whose purpose is
simply to promote financial education in Native communities.
The NFEC has worked with the National American Indian Housing Council to
build the capacity of housing entities to offer financial education, and with
the National Congress of American Indians and the National Indian Gaming
Association to help tribal departments' structure programs to promote financial
education opportunities. Most importantly, we are working with the National
Indian Education Association to institute financial education in schools so that
Native youth will be better equipped to face the financial challenges they
will encounter in today's competitive marketplace.
As for alternatives to payday lending, several Native CDFIs have
demonstrated that it is possible to offer fairly priced products combined with financial
education to help break the cycle of borrowing that many payday lenders try
to maintain to milk their profits. Citizen Potawatomi Community Development
Corp. (www.potawatomi.org), Four Bands Community Fund (www.fourbands.org) and
Lac Courte Oreilles Federal Credit Union (www.lcofcu.com) all offer products
specifically designed for Native consumers who encounter financial
difficulties and have few options other than payday lenders.
At Oweesta, we are working with Native CDFIs across the country to help them
replicate these types of consumer loan products. In the meantime, the best
''fix'' to combat these predatory practices is to pass legislation that would
limit the interest rates of payday lenders. Congress did pass legislation
that limits the interest rate that payday lenders can charge to military
personnel to 35 percent. This shows that Congress understands and acknowledges that
some consumers are more likely to fall victim to predators than others.
In my travels, it struck me how similar the landscape is on the borders of
both military bases and Native communities, especially reservations: payday
lenders and pawnshops as far as the eye can see. Shouldn't all Americans
benefit from the same protections? Especially Native consumers, who have been so
historically underserved by the financial services industry, have been victims
of discrimination and haven't had the opportunity to sharpen their financial
management skills? The answer is an unequivocal YES!
Payday lenders don't lend to provide a service to help consumers. They do it
because it is profitable. Instead of supporting an industry that
capitalizes on financial crisis and lack of experience, why not support efforts to
prevent the problems that create long-term patterns of dependency in the first
place?
Interest rate caps and support for financial education and Native CDFIs
would make it easier for Native consumers to avoid these sly wolves. But will our
lawmakers keep giving them their sheep's clothes?
Elsie Meeks is president and CEO of Oweesta Corporation and chair of the
Native Financial Education Coalition.