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Publications
I.
Economic Exploitation
"African Americans, Hispanic Americans, and in some cases Asian Americans
tend to fit a basic profile: They work harder for less, pay more for less, live
under
stress and do not live as long." Reverend Jesse L. Jackson, Sr.
Summary of Complaint:
We continue to face a skin tax in many aspects of financial and consumer services.
Among the most pervasive are: 1) Mortgage Lending - in which predatory practices
and
sub-prime lending enables financial institutions to enrich themselves at the
expense of the
consumer by charging excessive fees for first and second mortgage loans, refinancing
loans or home equity loans most often used for home improvements;. 2) Insurance
-
where redlining leads to higher premiums on property and casualty insurance policies
or
upside-down policies in which the investment in paying for the policy far exceeds
the
value gained;. 3) Automotive Lending - where mark-ups are practiced during the
automotive financing resulting in higher interest rates; and most recently joining
the list
4) Pension Defrauding - where unsophisticated investors are swindled out of their
life
savings by unscrupulous or novice brokers.
Many Lenders hide behind the cloak
of "credit scoring" as a basis for excessive fees and
high interest rates. Because most people of color work harder for less, and often
pay
more for less, they become trapped in a vicious cycle that is very difficult
to break. More
disenchanting are the instances in which credit scores are acceptable and exploitation
still
occurs.
The erosion of fair lending occurred in 1980 with the passage of the
Depository
Institution Deregulation and Monetary Control Act (DIDMCA) and in 1982 with the
Alternative Mortgage Transaction Parity Act (AMTPA). DIDMCA removed usury caps
on state interest ceilings, while AMTPA removed states' ability to limit terms
on
"alternative" mortgages, allowing negative amortizations, variable
rates, balloon
payments and (until 2003) prepayment penalties.
Summary
of Resolution:
We want consumer activities regulated, consumer protection laws passed, and violations
of said laws penalized to the fullest extent of the law. It is unreasonable for
consumers to
be taken advantage of due to lack of sophistication, language barriers or their
socioeconomic
class. The unfortunate reality is that most people of color tend to fit into
these
categories. Therefore we will continue to partner with consumer activist groups,
support
law suits and negotiate with the violators until justice is served.
A. Mortgage Lending (sources: National Consumer Law Center,
Center for Responsible Lending & Africana.com)
a. Since the passage of DIDMCA and AMTPA, nationally there has
been a 3.6% increase in homeownership and a startling 335.6% increase in
foreclosures.
b. Subprime mortgage-backed securities grew from over $18 billion issued
in 1995 to more than $134 billion issued in 2002 - this was done by capital
from Wall Street.
c. 48% of African Americans own their own homes, 47% of Hispanics own their
own homes while 75% of White Americans have realized the
American Dream.
d. Statistics have shown that African Americans are 4.1 times more likely
while Hispanics are 2.5 times more likely victimized by predatory lending.
e. African Americans are five times more likely to get a loan from a subprime
lender also known as legal extortion.
f. Subprime loans are: three times more likely in low-income
neighborhoods; five times more likely in African American
neighborhoods; and two to four times more likely in Latino/Hispanic
neighborhoods.
Predatory Lending is defined as charging excessive interest rates and fees
and the imposition of single premium credit life insurance and prepayment
penalties that provide no countervailing benefit to the borrower.
B. Insurance Redlining (source: New Jersey Citizen Action)
a. While Asians, African Americans and Hispanics are subjected
to
redlining, one study reveals Hispanics on average pay $303 more than all
three race groups when purchasing homeowners insurance.
Case Study on Practices of Prudential Insurance
Prices by Company
Asian Black Hispanic White
Total Average Price
$463.33 $446.75 $768.60 $430.40
Prudential
Average Price
$455.20 $318.25 $720.00 $241.00
Non-Prudential
Average Price
$516.00 $511.00 $801.00 $499.26
C. Automotive Finance Mark-up (source: Troubleshooter.com)
In a case study done on the automotive markup practices of Primus
Financial Services Inc., it was discovered that African Americans and Hispanic
Americans pay more for auto lending, even when their credit profile is similar
to that of White Americans.
b. 61.8% of African Americans were charged markups compared to 57.9% of Hispanics
and 41.1% of White Americans.
c. African Americans borrowers on average were charged 1.8 times the amount
of White Americans: $862 versus $475 a difference of $387 while Hispanics
were charged $715.
d. African Americans made up 16.3% of the borrower pool, although 31% of
them paid more than $3,000 in subjective mark-ups.
e. Notably, African Americans mark-ups have declined over the past four years
due to increased consumer awareness (Rainbow/PUSH economic literacy) and
Class Action Lawsuits:
• 2001 average markup - $930
• 2002 average markup -$872
• 2003 average markup -$699
• 2004 average markup -$498
f. We applaud GMAC and Ford Motor Credit Corp for imposing a 2.5% cap on
dealer markups.
D. Pension Defrauding
(sources: seniorjournal.com, Bureau of National Affairs, Balitimore.bizjournal.com)
Recently, there have been several cases and allegations of Investment Managers
defrauding individuals out of their pensions. In most cases the victims are unsophisticated,
illiterate or merely too trusting. The predators in most cases are either unscrupulous
or novice Investment Brokers. a. In one case, a Federal Grand Jury in Chicago
returned an indictment against two union leaders for engaging in a pattern of
criminal activity that included fraud, soliciting kickbacks, money laundering
and illegal currency transactions.
b. In another case, a CEO of an Investment firm was indicted for allegedly defrauding
the system, raiding corporate funds for private use and manipulating the stock
market.
c. In a pending case, over 300 retirees were victimized by excessive,
unauthorized and risky trading, which violated the state laws (in that
jurisdiction) for the management of pension funds.
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