Lurie Favors, Esq., theloop21.com, March 29, 2011
For the credit card industry every week is “Shark Week.” Like a Great White shark investigating a school of financially insecure fish they know where to find the people who “need” them the most.
Hence the term: “predatory lending.” They know those with the weakest bank statement (if they have a bank account at all) make the best prey.
Studies show that just like the mortgage industry, the credit card business is awash in racist policies. According to Andrea Freeman, law professor at California Western School of Law and author of a 2010 study called Credit Card Ills, there are many dangers for the black community when it comes to credit.
Racial discrimination appears “. . . in the form of ‘redlining,’ the practice of varying credit card contract terms based on the applicant’s zip code and other signifiers of race such as names and appearance.”
Essentially, black cardholders who carry balances on their accounts are more than twice as likely as whites to pay high interest rates.
So if you have a name commonly used in white communities, live in a white neighborhood and pay your bills on time, you might get a 7 percent interest rate. If you have an ethnic-sounding name, live in a black neighborhood and pay your bills on time, you might get a 17 percent interest rate.
Professor Freeman demonstrates that the credit card industry’s business model is based on the poorest consumers paying the highest fees and interest rates in order to subsidize credit card use by the richest consumers.
So why would credit card companies focus on people who are already having a hard time paying bills?
Subsistence Users tend to carry credit card balances from month-to-month. As a result they are charged interest fees on their balances. Interest is the price you pay for the privilege of getting today what you could not afford until tomorrow.
In 2004, nearly 60 percent of African Americans had a credit card, and nearly 84 percent of them carried a month-to-month balance. This means that low- and middle-class African Americans (who tend to live check to check) are essentially a primary source of income for a multi-billion dollar credit card industry.
Institutional racism allows the financial industry to profit off of the black community. Once we understand how much race impacts our fiscal choices, we can change our behavior, take control of our collective finances and create solutions to our economic reality.