How America Punishes People for Being Poor

[Triana]

In what seems a reprisal of the predatory practices that led up to the subprime mortgage crisis, low-income individuals are being sold auto loans at twice the actual value of the car, with interest rates as high as 29 percent. They can end up with monthly payments of $500—more than most of the borrowers spend on food in a month, and certainly more than most can realistically afford. Many dealers appear in essence to be setting up low-income borrowers to fail.

Dealers are also making use of a new collection tool called a “starter-interrupter device” that allows them not only to track a borrower’s movements through GPS, but to shut off a car with the tap of a smartphone—which many dealers do even just one or two days after a borrower misses a payment. One Nevada woman describes the terrifying experience of having her car shut off while driving on the freeway. And repossession of their cars is far from the end of the line for many borrowers; they can be chased for months and even years afterward to pay down the remainder of the loan.

Predatory subprime auto loans are just the latest in a long line of policies and practices that make it expensive to be poor—something I saw every day representing low-income clients as a legal aid attorney.

Low-income individuals are much more likely to be hit by bank fees, such as monthly maintenance fees if their checking account falls below a required minimum balance—balances as high as $1,500 at leading banks such as Bank of America and Wells Fargo—not to mention steep overdraft fees. For the more than 10 million U.S. households who lack a bank account, check cashers charge fees as high as 5 percent. This may not sound like much, but consider a low-income worker who takes home around $1,500 per month: She’d pay $75 just to cash her paychecks. Add in the cost of money orders—which she’ll need to pay her rent and other bills—and we’re talking about $1,000 per year just for financial services.

THE REST:

http://talkpoverty.org/2014/10/07/punished-for-being-poor/

(some very astute comments follow the article)

[Rochester]

1. Those buying cars would do well to research...

how to find and remove/disable the tracking or cutoff devices.
I sure as hell wouldn't want a car that could be tracked or controlled (remotely or otherwise) by anyone but me.

[Recursion]

7. Just short from its battery feed to the line that goes to the ignition.

Your lender will freak the hell out, though...

[Marrah_G]

11. they will repo it for removing the device.

[appalachiablue]

2. Thanks

I don't want to think this is happening in the US but know it is. Worse, how people are unaware b/c MSM doesn't report predatory, brutal action like this. And where is regulation? Nevermind.

[Delphinus]

5. Off topic,

but welcome to DU!

[appalachiablue]

8. Hello, nice to be here.

You want to write how my comment was off topic. I'm ready.

[Delphinus]

13. {smile}

No, not you being "off topic" - I meant that *I* was being off topic by welcoming you.

[appalachiablue]

23. Oops...

Totally misunderstood your meaning. Thanks for your patience!
(Nevermind, move along. Nothing to see here. Just a chat room novice, newbie DUer overreacting from wild news week, defensive. Getaway recommended...).
Have a great weekend, (from dunderhead, embarrassed but laughing! oh well.).

[brewens]

3. I remember living on the edge all the time. Never having the money to pay car insurance for six

months to save that $5 a month charge. Then getting dinged an extra five for not paying my electric bill on time. Add on a $15 bad check and on and on and on! Always "chasing it" like a bad freakin' gambler!

I don't make a lot of money but you get to a point where you break out of that if you do pretty well. Now I buy six months worth of cat food at Costco and am never late with a bill. Never get dinged by my bank. It doesn't take that much more money for someone that is responsible and most of us aren't asking for that much. A couple bucks and hour more does it for someone that is already working pretty hard. That's why I'm in favor of increasing the minimum wage. I remember what it was like for me years ago and I had it better than they do now.

It's like what I want out of retirement compared to what the people at the top get. I swear I'd be perfectly happy eating relatively cheap, a few beers watching the game and going fishing when I want within 100 miles of where I grew up here in Idaho. It is pretty freakin' good fishing though, that some people would pay big bucks for! Most of us out here are like that. Just don't ask us to work until we die!

[silverweb]

30. Ditto that!

[font color="navy" face="Verdana"]I remember the barely-squeaking-by days, too -- all too well -- and semi-retirement with a little security is a very welcome phase of life.

[theHandpuppet]

4. Thank you for posting this

I was unaware this was happening.

[hfojvt]

6. except they are not punished for being poor

and they are not punished by America

At least not in the cases in the snippet.

They are being punished for walking into traps. By choosing to take out a high interest rate loan or to use a check-cashing service. Maybe they are desperate, or maybe fees have gone up. My credit union only requires a minimum balance of $300 in my checking account, and that minimum only exists becuase I have interest-checking. (Which nets me perhaps $2 in income a year). Otherwise, why would anybody want to keep $1,500 in a checking account?

They are allowing themselves to be exploited by some predators, but the predators are not "America".

[Live and Learn]

14. They don't choose to take out high interest rate loans.

They are forced to because those are the only loans they can get and need a car to get to work.

Most poor people don't belong to credit unions and you pretty much do need a checking or savings account to get by today. A $300 balance may seem like nothing to you but that is only because you aren't poor.

[UglyGreed]

17. Funny how some/most companies

work, free perks to those who have lots and lots of cash and those who have barely enough to survive are charged an arm and a leg to do business with them. God bless us everyone!

[hfojvt]

19. a $300 balance is much less than $700 a year in fees

And anybody in this county can join my credit union by depositing a mere $25 into a savings account.

Do they really need a car to get to work, or are they just unwilling to walk two miles a day? Or use a bicycle?

As for me being poor. Well, I have been in the bottom quintile for most of my life, as far as income goes http://www.democraticunderground.com/1002625762

"25 year average 126.64%. (my income averaged 126.64% of official poverty income) 22 of 25 years in the bottom quintile, and no health insurance until May 2004."

But I have always had savings, ever since my parents got me to open an account at age 8 with $10 (and then about a year later I deposited another $7). Back in 1970, a kid could open an account with $10.

Given a choice between two hardships, the hardship of walking to work or the hardship of getting ripped off by a usurious loan, I will take the walk. But whose to say, maybe the other hardship is better.

[quaker bill]

16. I think you are mistaken

In my experience businesses that prey on the poor are ubiquitous. Something this common becomes part of the American experience. It is not the occasional operation that does this, exploiting the poor is an entire industry designed with intent to do just that. I have lived this life. Working minimum wage jobs is how I paid for college over a dozen years. I do not live that way anymore.

The traps are everywhere and it is difficult to avoid them. I avoided the "rent to own" trap by buying the scratch and dent goods they have repossessed a few times from their discount outlet. Fairly ugly and cheap stuff can be found there, but it can be serviceable, if all you want from a dining table is that it keep the dishes off the floor, you can get the job done cheap.

I avoided the "buy here - pay here" used car trap by buying even older cars and having a full set of mechanics tools and the skills to use them. In short, I learned the skills required to pick out a beater car with problems I could fix as opposed to problems that would require an engine hoist (which I did not own).

I got into a credit union to avoid most of the banking fees... the tale goes on an on, buying a very ugly house trailer for less than $1000, moving it with a jeep.....

[hfojvt]

20. they are everywhere

but they are also exploiting the lower middle class and not just the poor. I saw some of my co-workers and also my inlaws going to the finance place across the street.

"Rent to own" is only a trap if you CHOOSE to buy those items. My first and second apartments (about the cheapest ones in the area) included furnishings. I went without a car, until I sort of "needed" one to get to my brother's wedding some 1,000 miles away (the nearest airport was about 300 miles away (either Omaha or Minneapolis, both about 300 miles) and a bus trip included a six hour layover in Omaha.))

Although part of my "success" in scraping by, comes from having richer parents who are very helpful, and not everybody is so fortunate in birth. Dad offered to give me the family car, and I refused it, because it did not seem right for me to take the family car (even though it was an old beater and dad was probably ready to upgrade).

I lived without a car AFTER my dad drove me where I needed to be, many times, thousands of miles.

I am not sure if bank fees are any worse. I have been, at least partly, going with credit unions in order to be "non-corporate". When I used banks, or SNLs, I was not paying fees. My most recent bank account was in 2003. Before I got hired by the city and they steered me to the credit union, I was using the bank which has a drive through about a block from where I live. Before that I had accounts in Missouri and Iowa and Wisconsin and Nebraska, and Utah and South Dakota, never paid any fees. Curiously, that last bank was hesitant to give me a checking account, because of all the searches I had on my credit rating from financing my house.

[tabbycat31]

25. Credit unions are not available everywhere

Google the term 'unbanked' and you will see a picture of people who do not have access to financial institutions. One bounced check and your name can be put on a blacklist (Chex Systems is the tracking database).

[flvegan]

9. This is America's punishment?

What a headline! (albeit inaccurate)

[Marrah_G]

10. It is indeed more expensive to be poor.

[dilby]

12. America punishes them by making them think they need a car.

If you live in a major city you do not need a car, public transit and bikes are all you need. Unfortunately people seem to think that without a car they are less of a person. The average person spends 1 hour a day in a vehicle a yet hefty percentage of their income goes to it.

Over a year ago I decided to give up my car and just do public transit, I have 2 kids and I have managed to do just fine. Five months ago I got a bike for the grocery store and small trips, since then I bike everywhere if it's within 20 miles and I don't have my kids. I will never go back to owning a car. If I need a car I rent one which I only do when I need to head out of town.

[Live and Learn]

15. Public transportation is not readily available

Last edited Sat Oct 18, 2014, 02:26 PM - Edit history (1)

everywhere, including some big cities. And it is often time, quite expensive.

Why do some here insist on trying to make living in poverty less bad than it is?

[dilby]

26. Where I live it's $5 a day.

Which is way cheaper than a car payment, insurance and gas. Why do some here insist on trying to live below their means is bad?

[Live and Learn]

29. And again, not everybody lives where you live. nt

[tabbycat31]

24. Public transportation also limits work location and schedule

If the last bus leaves at 6 and your employer wants you to work until 6:30 you are SOL. I've been in (temporary) situations like that when my car was broken down.

In a city like New York public transportation is great. In other places it is not. It's a matter of location.

I'll probably never not own a car. I've gotten by without one, but missed it. But then again I'm not really a big city person.

[dilby]

27. I said major city.

If you live in some backwoods town where buses stop an hour after a working man gets off then yeah public transit is not for you. I lived in a town outside of portland where the buses stopped at 9:30 I worked late plenty of times and never missed the bus. Granted there are people who start work after that time and maybe they need a car but that number is small compared to the number who opt to make a huge car payment and complain about it.

[tabbycat31]

28. I lived in a pretty big city

When my car broke down (Raleigh-Durham NC) and while the buses did run in the evenings, not all of the routes did. If I took a late bus to get home, it would mean crossing a major highway. It was doable but not very safe crossing a 4 lane highway while it's dark.

I've only been to Portland (Maine or Oregon, I'm assuming the latter because riding your bike in Maine will be difficult 6 months of the year) once (as a teen) but from what I can tell it's a pretty progressive city with decent public transit infrastructure. Many southern cities are not like that.

I now live in a small town in NJ. There's a bus there but I'm not sure of the routes. The train (which is walking distance) only goes about 10 miles south and north to NYC. If I wanted to reach some of the other cities in this state (Trenton, Camden, etc) it would be an hour train ride (north) to Newark and then a connection (if it's south of Trenton often 2) which can easily take half the day.

I haven't had a car payment in over 10 years. I drive a 15 year old Subaru with 250K miles. It will be replaced with a used car I pay cash for.

[xchrom]

18. du rec.