The High Cost of Poverty
The financial recession has been a windfall for those who prey on the poor. Part of the reason people have a hard time escaping poverty is the fact that their poverty causes them to pay much more for many things. Here are some of the businesses that help to keep poor people poor:
1. Payday lenders
To get a payday loan, you write a postdated check (with the date usually coinciding with your next paycheck) and accept a smaller amount as your loan. For each $100 you borrow, the fee is typically $10 to $15 for a 10-day loan, although it can be higher. That fee would translate into an annual interest rate of nearly 400%. Tax offices offering instant loans on your refund run a similar scam.
2. 'Buy here, pay here' car lots
These dealers offer older, high-mileage cars, often with steep markups and loans that carry interest rates that can exceed 20%. The costs are so high that many borrowers fall behind on the loans, allowing the dealerships to repossess the cars and sell them again. Repossession rates are around 30%, according to the nonprofit Center for Responsible Lending, which says "collections and
repossessions (are) a critical part of their business model". This is one of the businesses I mentioned as part of my Campaign to Restore American Prominence. You can read about it at http://www.barnes4prez.com/middle.html
3. Used-car leasing
Instead of selling clunkers, lots lease them to drivers with poor credit who desperately need cars to get to work. The drivers often pay $1,500 to $2,000 upfront and then hundreds of dollars a month for a high-mileage car.
4. Rent to own
About 6 million Americans pay dearly for their impatience. These people are customers of the $7 billion rent-to-own industry, which specializes in getting people to pay two to four times the retail cost for furniture, computers, appliances, electronics and even tire rims.
A 2008 Federal Deposit Insurance Corp. study found that people earning less than $30,000 were far more likely to incur overdraft fees than those with higher incomes. More than 38% of low-income accounts had at least one insufficient-funds transaction, compared with 22% of upper-income accounts. Among the low-income customers, 16.7% of accounts had one to four overdraft
transactions, and 7.5% had 20 or more NSF transactions. That compared with 10.5% of upper-income accounts with one to four overdraft transactions accounts and3.8% with 20 or more.
If you have the time and the knowhow, you could be a big benefit to low-income families in your community by helping them avoid these Robbin' Hoods who steal from the poor to benefit the wealthy.